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Magistrate Recommends Dismissal of Takemoto False Claims Act Amended Complaint

By , June 25, 2015 1:18 pm
Article by Rafael Gonzalez, Esq. Vice President, Strategic Solutions HELIOS Settlement Solutions

Article by
Rafael Gonzalez, Esq.
Vice President, Strategic Solutions
HELIOS Settlement Solutions

On June 24, 2015, Jeremiah J. McCarthy, United States Magistrate Judge at the United States District Court for the Western District of New York, published its report and recommendations on United States of America ex rel Dr. Kent Takemoto v. ACE et al, concluding that since Dr. Takemoto’s Amended Complaint fails to allege a basis for liability “above the speculative level” against any particular named defendant, it fails to plausibly state a cause of action, and therefore recommends it should be dismissed.

On July 18, 2011, Dr. Kent Takemoto commenced an action on behalf of the United States pursuant to the False Claims Act (FCA), 31 U.S.C. §§3729 et seq., seeking to recover damages from defendants, including various insurance and holding companies, for their alleged failure to reimburse the government for payments made by the government to Medicare beneficiaries. On March 14, 2014, the United States elected not to intervene in the action. By Order dated April 3, 2014, Judge Skretny unsealed the Complaint and directed that it be served upon the defendants within 20 days.

On April 10, 2014 Dr. Takemoto moved for an extension of that deadline, stating that he intended “to substantially amend his complaint to narrow the number of defendants and add additional detail gathered since the complaint was filed”. Instead of narrowing the number of defendants, on October 31, 2014, over three years after filing the original Complaint, Dr. Takemoto filed an Amended Complaint significantly increasing the number of defendants. Arguing that the Amended Complaint fails to properly state a cause of action, defendants here seek its dismissal.

31 U.S.C Section 3729(a)(1)(G) imposes liability upon “any person who knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.” The word “or” is almost always disjunctive, that is, the words it connects are to be given separate meanings, strongly suggesting that the “knowing avoidance” prong of §3729(a)(1)(G) does not require proof of fraud, and instead applies “regardless of whether such actions involve a falsehood.”

While the statute requires knowing concealment or knowing and improper avoidance of an obligation to pay, the Amended Complaint repeatedly alleges that defendants “have knowingly concealed and knowingly and improperly avoided their obligation to pay or transmit money or property to the Government.” At oral argument, Dr. Takemoto’s attorney, Mr. Robert King, requested leave of court to drop the “knowingly concealed” allegation. The Magistrate here grants counsel’s oral request to drop the allegations of knowing concealment, so as to “strictly focus on a knowing avoidance claim.”

The court notes that although Dr. Takemoto need not plead with the specificity required by Rule 9(b) for fraud allegations, his Amended Complaint must still comply with Rule 8(a)(2), which requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” “Rule 8 requires that a plaintiff provide facts sufficient to allow each defendant to have a fair understanding of what plaintiff is complaining about and to know whether there is a legal basis for recovery.” This requirement is important, because the FCA “penalizes a person for his own acts, not for the acts of someone else.”

The court finds that the Amended Complaint groups related corporations together without differentiating as to the involvement of each, and that such grouping violates Rule 8(a).

The court noted that Dr. Takemoto’s failure to specify each defendant’s involvement was hardly surprising in light of the troubling admissions made by Mr. King during oral argument. For example, when the Magistrate Judge pointed out that “the named defendants include parent corporations” and asked how the court can “know from the allegations that those defendants would have had any obligations under the False Claims Act as opposed to one of their subsidiaries,” Mr. King responded that “if in fact those defendants were truly holding companies and not operating companies and did not write insurance, exactly which companies did which things is far from clear at this point. Sorting out which company on the front end before any discovery, which company did what is not an easy thing.”

The Magistrate Judge then asked Mr. King whether there was a problem with “naming companies that you don’t even know whether or not they did any of the type of activity that would even conceivably give rise to a False Claim Act violation”, to which Mr. King replied “I don’t think that is a problem here as that is something that I expect that we will learn in discovery.”

The court indicates that if that approach to pleading was ever acceptable, clearly it is no longer. “The day is past when our notice pleading practice invited the federal practitioner to file suit first and find out later whether he had a case or not.” “Complaints should not be filed in matters where plaintiffs intend to find out in discovery whether or not, and against whom, they have a cause of action.”

The court finds that not only does the Amended Complaint fail to make allegations specific to each defendant, it also fails to properly allege the basis for a claim against any defendant. A party cannot “knowingly and improperly avoid” an obligation to repay the government unless there is first an obligation to repay.

The court also notes that while the Amended Complaint does not identify any particular payment obligations which defendants have avoided (knowingly or otherwise), Dr. Takemoto argues that “allegations may be based on information and belief when facts are peculiarly within the opposing party’s knowledge,” and that he “has supplied information and belief, that permit a plausible inference that each of the defendants have incurred MSP repayment obligations under either the pleading standards of Rule 8(a) or 9(b).” The court however finds none of the Amended Complaint’s allegations are made “upon information and belief,” nor does Dr. Takemoto explain why the facts as to whether or not the beneficiaries have reimbursed the government – or which have done so – are “peculiarly within defendants’ knowledge”.

“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Even if there was factual support for the allegation that only a small fraction of Medicare beneficiaries repaid the government, it would still be unclear as to whether the remaining beneficiaries (who presumably did not repay) had received payments from any particular named defendant, or whether that defendant knew or should have known about the beneficiary’s failure to repay – meaning that the obligation of any particular defendant to repay the government would be speculative at best.

The court therefore concludes that since the Amended Complaint fails to allege a basis for liability “above the speculative level” against any particular named defendant, it fails to plausibly state a cause of action, it should therefore be dismissed.

While arguing that the Amended Complaint is legally sufficient, Dr. Takemoto suggests that “in the alternative, should the Court determine that any of Dr. Takemoto’s allegations are insufficient and require dismissal, the dismissal should be without prejudice, and Dr. Takemoto should be given an opportunity to cure any such deficiencies”. The court concludes that such bare-bones request does not warrant granting leave to replead. As a matter of fact, the court indicates that the statements made by Mr. King at oral argument lead him to conclude that Dr. Takemoto lacked a good faith basis for the allegations of the Amended Complaint. Although the court did not impose sanctions, the Magistrate Judge considered this factor in deciding whether to allow him to replead.

For these reasons, the Magistrate Judge recommend that the Joint Motion be granted and that the Amended Complaint be dismissed, with prejudice as to Dr. Takemoto, but without prejudice to the government’s ability to assert claims on its own behalf. All other pending motions were also denied as moot, with leave to renew if his recommendation to grant the Joint Motion is not adopted.

This may not be the last we hear about this case as most expect Dr. Takemoto to object to these conclusions. As a result, unless otherwise ordered by Judge Skretny, any objections to the Magistrate Judge’s Report and Recommendation must be filed by July 13, 2015. In addition, it is expected that there may be additional requests for extension of this deadline, as a party who fails to object to such recommendations timely, waives any right to further judicial review of this decision. As always, Helios Settlement Solutions will continue to follow this case and report on any further activity.

Modification of Query Matching Criteria for Partial SSNs

By , June 18, 2015 2:45 pm
Post by Frank Fairchok MedicareConnect℠ Senior Manager

Post by
Frank Fairchok
MedicareConnect℠ Senior Manager

CMS has released an alert to notify all users that they have modified the matching criteria for queries where the full Social Security Number could not be obtained and a five-digit SSN was provided. This change, which is effective immediately, fixes an issue where false beneficiary matches were made when the partial SSN and only three of the other four query fields were matched with the existing full SSN logic. CMS will now utilize the partial SSN and the other four query elements as detailed here:

  • First initial of the first name
  • First 6 characters of the last name
  • Date of birth (DOB)
  • Gender

Per CMS, when an exact match on the partial SSN is found, then all of the other four remaining data elements must be matched to the individual exactly. However the matching criteria for HICNs and full SSNs will remain the same.

It is important to note that CMS encourages RREs to submit the HICN or full SSN when it is available to ensure the most accurate match is obtained. CMS reminds RREs in this alert that failure to match to a Medicare beneficiary with the full or partial SSN does not negate the RRE’s Section 111 mandatory reporting requirement when a reportable claim exists.

This alert, dated and released on June 18, 2015, can be found at the following address: https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Mandatory-Insurer-Reporting-For-Non-Group-Health-Plans/Downloads/New-Downloads/Technical-Alert-Modification-of-Matching-Criteria-Used-When-Reporting-Partial-Social-Security-Numbers-for-Liability-Insurance.pdf

For more information, please contact Frank Fairchok, Senior Manager of MedicareConnect at Frank.Fairchok@helioscomp.com.

HB 2649 and SB 1514: Congress’ Renewed Attempt to Streamline the Workers Compensation and Medicare Set Aside Settlement Process

By , June 10, 2015 9:34 am
Article by Rafael Gonzalez, Esq. Vice President, Strategic Solutions HELIOS Settlement Solutions

Article by
Rafael Gonzalez, Esq.
Vice President, Strategic Solutions
HELIOS Settlement Solutions

US House Bill 2649 and US Senate Bill 1514 were filed on June 4, 2015 by US Representative Reichert and US Senator Portman to amend title XVIII of the Social Security Act to provide for the application of Medicare secondary payer rules to certain workers’ compensation settlement agreements and qualified Medicare set-aside provisions. Co-sponsored by US Representative Thompson and US Senator Nelson, the bills were read twice and referred to the House Ways and Means, and thereafter referred to the House Energy and Commerce Committee, and on the Senate side, referred to the Committee on Finance. What follows is a summary of the proposed companion bills as introduced.

Settlements Under $25,000 are Exempt

House Bill 2649 and Senate Bill 1514 amend Section 1862 of the Social Security Act (42 U.S.C. 1395y) by adding a new subsection (p). The first change the bill introduces is a threshold for “certain workers compensation settlements whereby a workers’ compensation law or plan shall not be treated as a primary plan.” The bill proposes that “any workers’ compensation settlement agreement that does not exceed $25,000 or such greater amount as the Secretary may specify in regulations” would exempt the plan or claimant from having to take Medicare’s future interests into consideration. In other words, in any workers compensation settlement under $25,000 with a current Medicare beneficiary, Medicare would become the primary payer for any medical care related to the workers compensation claim, as neither the claimant nor employer/carrier would have to set aside any monies from such settlement to protect Medicare’s future interests.

Also exempt from taking Medicare’s future interests into account would be settlements where “the settling claimant is not eligible for Medicare benefits as of the effective date of the agreement; and is unlikely to become so eligible within 30 months after such effective date, settlements where the claimant subject to such agreement is not eligible for payment of medical expenses incurred after the effective date of the agreement from the workers’ compensation law or plan of the jurisdiction in which such agreement will be effective, or settlements in which such agreement does not limit or extinguish the right of the claimant to payment of medical expenses incurred after the effective date of such agreement by the workers’ compensation law or plan of the jurisdiction in which the agreement will be effective.”

Claimants Unlikely to Become Medicare Eligible

House Bill 2649 and Senate Bill 1514 indicate that “a workers’ compensation claimant shall be deemed unlikely to become eligible for Medicare benefits within 30 months after the effective date of the agreement unless, as of the effective date of the agreement, such claimant is insured for disability insurance benefits and the individual has been awarded such disability insurance benefits, the individual has applied for such disability insurance benefits, the individual has been denied such disability insurance benefits but anticipates appealing that decision, the individual is in the process of appealing or refilling for such disability insurance benefits, the individual is at least 62 years and 6 months of age, or the individual is medically determined to have end-stage renal disease but does not yet qualify for Medicare benefits based on such disease.”

Determination of Total Settlement Amount

House Bill 2649 and Senate Bill 1514 propose to define the total settlement amount of the agreement as “the sum of monetary wage replacement benefits, attorney fees, all future medical expenses, repayment of Medicare conditional payments, payout totals for annuities to fund the expenses listed above, and any previously settled portion of the workers’ compensation claim.”

Qualified Medicare Set Aside

House Bill 2649 and Senate Bill 1514 further amend Section 1862 of the Social Security Act (42 U.S.C. 1395y), by adding a method to satisfy the Secondary Payer requirements through the use of a Qualified Medicare Set Aside. Although the bills do not require any notice to CMS of the actual creation of a Qualified Medicare Set Aside, the amount of the set aside, how much was set aside for treatment and for prescription needs, whether funded through a lump sum or structured, and if self administered or professionally administered, the bills make it clear that “if a workers’ compensation settlement agreement includes a Qualified Medicare Set Aside, such set aside shall satisfy any obligation with respect to future payment reimbursement related to such claim.” The bills also indicate “submission of a Qualified Medicare set-aside to the Secretary is not required,” but would remain a voluntary choice of the settling parties.

The bills indicate that a Medicare set-aside shall be deemed to be a Qualified Medicare set-aside if “the Medicare set-aside amount reasonably takes into account the full payment obligation of the settling payer, based on the illness or injury giving rise to the workers’ compensation claim involved, the age and life expectancy of the claimant involved, the reasonableness of and necessity for future medical expenses for treatment of the illness or injury involved, the duration of and limitation on benefits payable under the workers’ compensation law or plan involved, and the regulations and case law relevant to the State workers’ compensation law or plan involved.”

A Qualified Medicare set-aside shall include “payment for items and services that are covered and otherwise payable under the Medicare system as of the effective date of the workers’ compensation settlement agreement and that are covered by the workers’ compensation law or plan. The Qualified set-aside amount “shall be based upon the payment amount for items and services under the workers’ compensation fee schedule (effective as of the date of the agreement) applicable to the workers’ compensation law or plan involved.”

Compromise Settlements and the Use of Percentage Reduction MSAs

In the case of a compromise settlement agreement, defined in the bills as a “workers’ compensation settlement agreement in which the workers’ compensation claim has been denied or contested, in whole or in part, by a workers’ compensation payer involved under the workers’ compensation law or plan applicable to the jurisdiction in which the agreement has been settled that does not provide for a payment of the full amount of benefits sought or that may be payable under the workers’ compensation claim,” contrary to CMS current policy which does not permit any reduction of set asides resulting from a compromise settlement, House Bill 2649 and Senate Bill 1514 propose that “a claimant or workers’ compensation payer who is party to the agreement may elect to calculate the Medicare set-aside amount by applying a percentage reduction to the Medicare set-aside amount.

Such percentage reduction would be used “with the total settlement amount that could have been payable under the applicable workers’ compensation law or similar plan involved had the denied, disputed, or contested portion of the claim, had it not been subject to a compromise agreement.” The percentage reduction “shall be equal to the denied, disputed, or contested percentage of such total settlement.” However, such election may be made “only with the written consent of the other party to the agreement .” If the claimant or workers’ compensation payer elects to calculate the Medicare set-aside amount under this percentage reduction formula, “the Medicare set-aside shall be deemed a Qualified Medicare set-aside.

Voluntary Approval Process

As previously indicated, House Bill 2649 and Senate Bill 1514 propose that the creation of a Qualified Medicare set-aside satisfies secondary payer obligations. However, “a party to a workers’ compensation settlement agreement that includes a Medicare set-aside may submit to the Secretary the Medicare set-aside amount for approval of the set-aside as a Qualified Medicare set-aside.

If in fact parties seek such approval, the bills indicate that “not later than 60 days after the date on which the Secretary receives a submission, the Secretary shall notify in writing the parties to the workers’ compensation settlement agreement of the determination of approval or disapproval.” If the determination disapproves such submission, “the Secretary shall include with such notification the specific reasons for the disapproval.” In the case of a failure by the Secretary to mail or deliver the notice of the determination within 60 days, “the party involved may file an appeal directly to the administrative law judge within 30 days after such failure.

Medicare Set Aside Appeals Process

House Bill 2649 and Senate Bill 1514 propose that “a party to a workers’ compensation settlement agreement that is dissatisfied with a determination may file a request for reconsideration with the Secretary not later than 60 days after the date of notice of such determination.” The Secretary “shall conduct and conclude such reconsideration within 30 days from the date that the request for such reconsideration was filed.” If a party to the workers’ compensation settlement agreement is dissatisfied with the Secretary’s reconsideration, “that party may file an appeal within 30 days of date of receipt of the notice of the decision and request a hearing before an administrative law judge.” In the case of a failure by the Secretary to mail or deliver the notice of the reconsideration decision within 30 days, “the party involved may file an appeal directly to an administrative law judge not later than 30 days after such failure.”

Although other federal administrative procedures for similar type appeal processes do not include such time limitations, and without any funding to carry out such time sensitive tasks, House Bill 2649 and Senate Bill 1514 indicate that “an administrative law judge shall conduct and conclude a hearing on a decision of the Secretary or a determination with respect to which the Secretary failed to render a timely decision within 90 days, beginning on the date that a request for such hearing was timely filed.” Bypassing the usual appeal to the Appeals Council, the bills propose that a decision by an administrative law judge constitutes a final agency action and “is subject to judicial review.” In the case of a “failure by an administrative law judge to render a decision within 90 days, the party requesting the hearing shall be entitled to judicial review of the decision.”

Administration of Medicare Set Asides

House Bill 2649 and Senate Bill 1514 propose that, effective 30 days from the date of enactment of the bills, “with respect to a claim for which a workers’ compensation settlement agreement is or has been established, a claimant or workers’ compensation payer who is a party to the agreement may elect, but is not required, to transfer to the Secretary a direct payment of the Qualified Medicare set-aside.”

There are three permissible methods of calculating the Qualified Medicare set-side when directly making such payment to the Secretary. First, “in the case of any Medicare set-aside in a compromise settlement agreement, the parties may use the percentage reduction formula to calculate the amount of the Qualified Medicare set-aside.” Second, “in the case of any Medicare set-aside, the amount based upon the payment amount for items and services under the workers’ compensation fee schedule (effective as of the date of the agreement) applicable to the workers’ compensation law or plan involved.” And third, “in the case of any Medicare set-aside, the payment amount applicable to the items and services under the Medicare system as in effect on the effective date of the agreement. Such transfer shall be made only upon written consent of the other party to the agreement.”

If the parties do not choose to make such direct payment to the Secretary, then House Bill 2649 and Senate Bill 1514 indicate that “nothing prohibits an individual from electing to utilize professional administration services or to self-administer payments of their Medicare Set-Aside in accordance with existing law.”

Protection from Liability

House Bill 2649 and Senate Bill 1514 propose that no claimant, payer, employer, administrator, or legal representative of the parties “shall be liable for any payment amount established under a Medicare set aside for an item or service provided to the claimant that is greater than the payment amount established under the workers compensation fee schedule (or in absence of such schedule, the medical reimbursement rate) under the compensation law of the jurisdiction where the agreement will be effective.” In order to provide uniformity, the bills indicate that “a provider may not bill (or collect any amount from) the workers compensation claimant, payer, employer, administrator, or legal representative an amount that is greater than the payment rate established under the Medicare set aside of the agreement.”

The bills further propose that “if a provider willfully bills (or collects an amount) for such an item or service in violation of same, the Secretary may apply sanctions against the provider in accordance with 42 USC section 1842(j)(2) in the same manner as such section applies with respect to a physician.”

State Workers’ Compensation Law is Final and Conclusive

House Bill 2649 and Senate Bill 1514 propose that “if a workers’ compensation settlement agreement is accepted, reviewed, approved, or otherwise finalized in accordance with the workers’ compensation law of the jurisdiction in which such agreement will be effective, such acceptance, review, approval, or other finalization shall be deemed final and conclusive as to any and all matters within the jurisdiction of the workers’ compensation law, including the determination of reasonableness of the settlement value; any allocations of settlement funds; the projection of future indemnity or medical benefits that may be reasonably expected to be paid under the State workers’ compensation law; and, in the case of a compromise agreement, the total amount that could have been payable for a claim which is the subject of such agreement.”

Private Cause of Action

House Bill 2649 and Senate Bill 1514 propose that paragraph (3)(A), the private cause of action provision of the Medicare secondary payer law, be amended to include the words “Subject to subsection (q),” before the beginning of the first sentence. Therefore, the bills propose the first sentence to read “Subject to subsection (q), there is established a private cause of action.”

Meeting Requirements of the Law

House Bill 2649 and Senate Bill 1514 propose that “if the parties to a workers’ compensation settlement agreement met the provisions of section 1862(b) of the Social Security Act (42 U.S.C. 1395y(b)) on the effective date of settlement, it shall be accepted as meeting the requirements of such section notwithstanding changes in law, regulations, or administrative interpretation of such provisions after the effective date of such settlement.” The bills indicate that “amendments made by the bill, unless otherwise specifically specified, shall apply to workers’ compensation settlement agreements with an effective date on or after October 1, 2015.”

This is the sixth version of similar proposals to amend the MSP Act specific to WCMSAs dating back to 2007. As in the past, as these proposals make their way through the legislative process, Helios Settlement Solutions will report on these bills’ score, reported savings or costs to taxpayers over the next 10 years as a result of the changes proposed, any co-sponsors in either chamber of Congress, any amendments made by members and committees, as well as CMS’ reaction and position on same.

Using California’s Independent Medical Reviews to Challenge the Set Aside Amount

By , May 27, 2015 1:20 pm
Article by Rafael Gonzalez, Esq. Vice President, Strategic Solutions HELIOS Settlement Solutions

Article by
Rafael Gonzalez, Esq.
Vice President, Strategic Solutions
HELIOS Settlement Solutions

Introduction

What happens when Medicare requires that a Workers Compensation Medicare Set Aside include the future costs of medical treatment and prescriptions that may not be covered under a state workers compensation law particular or applicable to the claim? What is CMS’ policy on situations where a state statutory provision, administrative rule, regulatory provision, or case law indicates the recommended care is not allowed, permissible, or otherwise awardable as part of or resulting from the workers compensation claim?

What about the legal dispute resolution process? Short of an executive branch administrative law judge or constitutional member of the state judiciary system rendering a decision on the merits of the claim as to whether medical care and/or prescriptions requested are or are not related to the workers compensation claim, what is the Centers for Medicare and Medicaid Services doing with administrative decisions on the compensability of such requests? In other words, will CMS recognize and give credibility to non-judicial, but statutorily authorized methods of medical conflict resolution such as California’s Independent Medical Review?

The Medicare Secondary Payer Act

Section 1862(b)(2) of the Social Security Act indicates that Medicare may not pay for a beneficiary’s medical expenses when payment “has been made or can reasonably be expected to be made under a workers’ compensation plan, an automobile or liability insurance policy or plan (including a self-insured plan), or under no-fault insurance.” See also 42 C.F.R. § 411.21. As a result, the Medicare Secondary Payer Act (MSP) not only requires parties to take Medicare’s past interests into account, but also consider Medicare’s future interests into account when settling future medical care related to a workers’ compensation claim by making sure Medicare remains the secondary payer at all times. 42 USC Section 1395y(b)(2).

Medicare Set Asides

Although not statutorily mandated, the “preferred” manner for parties to take Medicare’s future interests into consideration when settling future entitlement to medical benefits related to the workers compensation claim is through the creation of a Medicare set aside (MSA). In addition, the parties to a workers’ compensation (WC) settlement may voluntarily choose to get the Center for Medicare and Medicaid Services (CMS) approval of the MSA amount in order to establish that they have in fact taken Medicare’s future interests into account and to further provide certainty with respect to the amount that must be properly spent before Medicare becomes the primary payer for the work comp claim-related care.

Workers Compensation Medicare Set Asides

As defined by CMS, a workers’ compensation Medicare set aside (WCMSA) “allocates a portion of the WC settlement for all future claim-related medical expenses that are covered and otherwise reimbursable by Medicare.” WCMSA Reference Guide, Section 3.0 (1/5/2015). Therefore the goal of establishing a WCMSA is to “estimate, as accurately as possible, the total cost that will be incurred for all medical expenses otherwise reimbursable by Medicare for claim-related conditions during the course of the claimant’s life, and to set aside sufficient funds from the settlement, judgment, or award to cover that cost.” WCMSA Reference Guide, Section 3.0 (1/5/2015). Thus, only future medical costs and prescription needs that have been determined to be related to the claim, and for which the employer/carrier is legally responsible for under the state specific workers compensation law, are to be included in the WCMSA.

When State Law Conflicts with CMS Policy

But what happens when Medicare requires that the WCMSA include the future costs of medical treatment and prescriptions that may not be covered under the state workers compensation law particular or applicable to the claim? What is CMS’ policy on situations where a state statutory provision, administrative rule, regulatory provision, or case law indicates the recommended care is not allowed, permissible, or otherwise awardable as part of or resulting from the WC claim? What is CMS or its Workers Compensation Review Contractor (WCRC) doing in such situations? Are they excluding such care and prescription costs based on state law, or are they including these in the MSA allocated amount nonetheless?

The WCMSA Reference Guide specifically addresses this issue. Section 9.4.3 specifically indicates that “the WCRC strives to comply with the laws of the state determined to be the appropriate state of venue. The reviewers research the applicable state regulations.” Section 9.4.4 specifically states that “CMS will recognize or honor any state-mandated, non-compensable medical services and will separately evaluate any special situations regarding WC cases. A submitter requesting that CMS review the applicability of a state WC statute must include a copy of the statute with the submission and indicate to which topic in the submission the statute applies.”

California’s Independent Medical Review Process

What about the legal dispute resolution process? Short of an executive branch administrative law judge or constitutional member of the state judiciary system rendering a decision on the merits of the claim as to whether medical care and/or prescriptions requested are or are not related to the workers compensation claim, what is CMS doing with administrative decisions on the compensability of such requests? In other words, will CMS recognize and give credibility to non-judicial, but statutorily authorized methods of medical conflict resolution such as California’s Independent Medical Review?

Senate Bill 863 was passed by California’s Legislature on August 1, 2012 and signed by Governor Brown on September 18, 2012. Among its many changes, the bill, which took effect on January 1, 2013, made significant changes to California’s workers’ compensation system by introducing a new process called independent medical review (IMR) to resolve disputes about the medical treatment of injured employees. As of July 1, 2013, medical treatment disputes for all dates of injury are to be resolved by physicians through IMR, rather than through the court system.

A request for medical treatment in the workers’ compensations system must go through a “utilization review” process to confirm that it is medically necessary before it is approved. If utilization review denies, delays or modifies a treating physician’s request for medical treatment because the treatment is not medically necessary, the injured employee can ask for a review of that decision through IMR. California Labor Code §3610.6(h).

The decision issued by the IMR is deemed to be the determination of the Administrative Director (AD) and it is binding on all parties. If the disputed treatment is determined to be medically necessary, the claims administrator must promptly implement the decision unless it disputed liability for the treatment on a basis other than medical necessity or it files an appeal. If the disputed treatment has already been provided, the claims administrator must reimburse the medical provider within 20 days. If the disputed treatment has not been provided, the claims administrator must authorize the treatment within five business days. California Labor Code §3610.6(h).

If either party is unsatisfied with the IMR determination, the dissatisfied party may file a petition with the Workers’ Compensation Appeals Board (WCAB) within 30 days of the mailing of the final determination. The final determination is presumed correct. Should the WCAB reverse the final determination, then the WCAB returns the dispute to the AD for either assignment to a different IMR, or assignment to a different medical reviewer where a different IMR is not available. California Labor Code §3610.6(h).

If after going through the IMR process and obtaining a decision that such requested care is not permitted or authorized by the specific state statute, CMS through its WCRC still includes such treatment or prescriptions in the WCMSA, the parties have the option to submit a re-review request of the approved WCMSA amount. WCMSA Reference Guide, Section 16.0 (1/5/2015). When either party disagrees with CMS’ decision because either one believes (1) CMS’ determination contains obvious mistakes; or (2) there is additional evidence, not previously considered by CMS, which was dated prior to the submission date of the original proposal and which warrants a change in CMS’ determination, either party may request such re-review. WCMSA Reference Guide, Section 16.0 (1/5/2015).

Challenging CMS’ Inclusion of Medical Care and Prescription in the MSA

Helios Settlement Solutions recently submitted several California MSAs to CMS without any of the medical care and prescriptions denied by the IMR. However, despite such uncontroverted evidence, the WCRC included the medical services which had been denied by the IMR in the approved WCMSA. As a result, our team requested re-review, or reconsideration.  We argued that the post traumatic stress disorder, cervical condition, and pain and psychiatric disorders included in each of the MSAs should be excluded because an IMR had concluded that such treatment was not medically related and necessary as a result of the work comp claim. CMS had included such services in each case based on its policy that it would not provide deference to an IME opinion.

Our team however argued that the IMR is not an IME, but a resolution process conclusion mandated by California’s workers compensation law and therefore such opinion should be upheld, allowing the post traumatic stress disorder, cervical condition, and pain and psychiatric disorders to be removed. Our position was that pursuant to California Labor Code §3610.6(h) (Senate Bill 863), the IMR decision is final and binding upon the parties. We therefore argued that CMS cannot include such medical services in the WCMSA where the employer/carrier is not legally responsible for same under California’s state law.

In response to our request for reconsideration, CMS removed the unrelated post traumatic stress disorder treatment (saving $251,507), treatment for the unrelated cervical condition (saving $187,876) and unrelated pain and psychiatric medications (saving $70,383).

Conclusion

The Medicare Secondary Payer Act not only requires parties to take Medicare’s past interests into account, but also to consider Medicare’s future interests into account when settling future medical care related to a workers’ compensation claim by making sure Medicare remains the secondary payer at all times. Although not statutorily mandated, the “preferred” manner for parties to take Medicare’s future interests into consideration when settling future entitlement to medical benefits related to the workers compensation claim is through the creation of a Medicare set aside. A workers’ compensation Medicare set aside allocates a portion of the work comp settlement for all future claim-related medical expenses that are covered and otherwise reimbursable by Medicare. If however state law conflicts with CMS policy, CMS will recognize or honor any state-mandated, non-compensable medical services and will separately evaluate any special situations regarding the specifics of the work comp case.

Senate Bill 863 was passed by California’s Legislature on August 1, 2012 and signed by Governor Brown on September 18, 2012. The bill, which took effect on January 1, 2013, made significant changes to California’s workers’ compensation system by introducing independent medical review to resolve disputes about the medical treatment of injured employees. As of July 1, 2013, medical treatment disputes for all dates of injury are to be resolved by physicians through IMR, rather than through the court system. The decision issued by the IMR is deemed to be the determination of the Administrative Director and it is binding on all parties. If after going through the IMR process and obtaining a decision that such requested care is not permitted or authorized by the specific state statute, CMS still requires inclusion of such treatment or prescriptions in the set aside, the parties have the option to submit a re-review request of the approved amount.

Helios Settlement Solutions is committed to making sure that any set aside we produce, and which is ultimately approved by CMS, includes only those items that are related to the claim, awardable pursuant to state law, and allowed under Medicare law. As a result, we are always on the lookout for any administrative orders, findings of a court, or regulatory body conclusions that pursuant to state law has the authority to conclude whether such medical care is related to the claim and awardable under state law. Upon verifying same, our experienced and knowledgeable staff will produce a WCMSA that will not include any medical services or prescriptions denied by the IMR, and should CMS include such items in the WCMSA, guide you through the current CMS appeals process, allowing for re-review or reconsideration of its approved set aside amount.

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