Conditional Payment Recovery is not for Wimps

Workers’ compensation, auto personal injury protection (PIP) insurers, commercial premises med pay insurers and all liability insurers continue to struggle with the recovery compliance process concerning the repayment to Medicare conditional payments CMS believes are owed as demanded.

The dispute process and challenge to the indebtedness is complex and must include supporting documents such as medical evidence, judicial decisions, and state statutes controlling the underlying claim, so arguments and defense may be included in the rebuttals and appellate briefs submitted.

The risks and potential consequences of ignoring demands and not reimbursing Medicare and/or Medicare Advantage Plans (MAP) are generally unacceptable and costly to self-insureds, insurers, and third party administrators (TPAs). Unfortunately, there is still a lack of knowledge, experience, and expertise in managing conditional payments as the regulations change and become more comprehensive and as the Centers for Medicare and Medicaid Services (CMS) recovery contractors rely on what has already been reported to CMS via Section 111 mandatory insurer reporting (MIR).

It is not uncommon, and understandably so, for an adjuster to take the path of least resistance and merely reimburse Medicare the total amount of the conditional payment amount to simply close the file or to ignore the conditional payment demand altogether until the notice of intent to refer the debt to the Department of Treasury is received.

When one inexperienced in this process blows through the first and second levels of appeal—redetermination and reconsideration respectively—it takes over two years to bring the third level appeal before an administrative law judge. If all applicable arguments and defenses have not been raised at the second appeal level, they are waived and may not be heard or considered.

In this discussion, we will explore and dissect actual cases illustrating three misconceptions continuing to plague conditional payment recovery involving counterintuitive ideas we may not wish to confront:

  • What has already been reported to CMS via Section 111 MIR trumps all legitimate medical and legal arguments and defenses as well as what the parties have agreed upon unless and until corrected.
  • Conditional payments related to injuries/illness claimed and released must be reported and reimbursed even when liability/responsibility is unlikely or disputed.
  • Diagnosis codes bundled by the provider on a specific date of service may have to be repaid even if not treated and even if not the reason for the provider encounter.

Let’s begin by examining a case in which defenses and arguments were presented that should have resulted in a significant reduction in conditional payments.

Case 1

Mr. Bagley was a 64-year-old baggage handler for ACME Airlines. On July 8, 2010, Mr. Bagley complained of pain in his back and neck after handling over 350 bags in one day. He reported the pain to his supervisor and a workers’ compensation claim was filed. After the initial investigation, the following aforementioned injuries were deemed compensable: lumbar strain (847.2) and cervical strain (847.0).

However, he was not yet a Medicare beneficiary. Eventually, ongoing responsibility for medicals (ORM) was assumed on his Medicare eligibility date of October 10, 2010. The following ICD9 codes listed on the latest Health Insurance Claim 1500 form approved by the adjuster for payment to the provider was reported via Section 111 mandatory insurer reporting (MIR): lumbar strain (847.2), cervical strain (847.0), inguinal hernia without mention of obstruction or gangrene (550.9), elevated prostate specific antigen [PSA] (790.93).

He was treated conservatively with rest, rehab, and epidural steroid injections over a period of months, and was eventually released to return to work at full duty on November 17, 2010, with no permanent impairment assigned. He was paid indemnity benefits during the time his treating physician had him off work. Because there was no settlement and related medical expenses were left open, the file was administratively closed six months later. Mr. Bagley did not seek further medical treatment and retired from ACME Airlines on his 65th birthday, March 16, 2011.

On May 10, 2016, the responsible reporting entity (RRE) was mailed a conditional payment notice (CPN) showing that $11,446.55 was identified as related conditional payments. Most of the ICD diagnosis codes listed in the Commercial Repayment Center’s (CRC) Statement of Reimbursement were unrelated to the cervical and lumbar strain/sprain and instead were to treat his subsequent prostate cancer and inguinal hernia repair.

ORM was not terminated for ICD diagnosis codes. Some of the ICD codes were unrelated and erroneously reported. As such, the initial decision from the CRC was unfavorable. A request for reconsideration was filed with the Qualified Independent Contractor (QIC) assigned once the corrections were made in the Section 111 data fields and re-reported to CMS. The inguinal hernia and elevated PSA level ICD codes were deleted since Mr. Bagley never claimed a hernia or elevated PSA level to be related to his work injury nor did his workers’ compensation (WC) treating physician ever treat either condition. A copy of the clinic notes was submitted as evidence to show no hernia was ever mentioned or treated. However, the elevated PSA level was listed in the past medical history showing he was under the care of a personal urologist.

While there were no medical records for the hernia surgery, a causation E code with a specific date of incident occurring after his retirement date was used to dispute a subsequent, unrelated cause for the inguinal hernia. The CRC statement of reimbursement showed that ICD9 code E919.2, accidents caused by lifting machines and appliances, was billed on June 18, 2012.

Case 2

The second case we will examine is one in which the ICD codes assigned when ORM was assumed for compensable injuries treated necessitated reporting of additional ICD codes when the case settled and TPOC was reported for all claims released.

On November 5, 2015, 66-year-old, 235-pound, Mr. Green stepped into a hole while working, twisted his knee, and sustained a left meniscus tear confirmed by MRI. ICD code S83.201 was deemed compensable and reported to CMS via Section 111 MIR when ORM was assumed shortly afterward.

After a lengthy period of physical therapy with limited success, a decision to perform a left knee arthroscopy was made. The procedure was followed by additional rehabilitation with an eventual release to return to regular duty some eight months after the initial date of injury.

Almost 18 months post return to work, Mr. Green complained of low back pain, but could not identify a specific activity triggering the pain, so his workers’ compensation claim to add his low back pain was denied. While his orthopedic surgeon who performed the arthroscopy attributed his low back pain to a change in gait resulting from the meniscus tear, an IME spine surgeon did not agree. No medical or indemnity benefits were paid as a result of his lower back complaints. He continued to treat for his back pain but never returned to work and instead retired. His disputed workers’ compensation claim for both injuries was compromised and settled on July 17, 2017, for $50,000.

The total payment obligation to the claimant (TPOC) amount and date was reported to CMS via Section 111 MIR which included both the ICD diagnosis codes S83.201 and M54.41. An ORM termination date was reported since all medical benefits were included in the settlement.

MMSEA Section 111 Medicare Secondary Payer Mandatory Reporting Liability Insurance (Including Self-Insurance), No-Fault Insurance, and Workers’ Compensation USER GUIDE, Version 5.2, Chapters 3 & 6, state when a claim settles, all injuries claimed and released must be reported to CMS. As such, both of the following ICD codes were reported upon settlement: left meniscus tear (S83.201) and lumbago with sciatica, right side (M54.41).

Case 3

The final case to review involves ICD diagnosis codes bundled by the medical provider into a specific date of service even though the reason for the provider encounter did not include treatment involving the ICD diagnosis code.

On December 13, 1984, while working, Mr. Coleman injured his lower back. Over the course of several years, he has periodically continued to be treated by his authorized treating physician for chronic low back pain as a result of his degenerative lumbosacral disc. His employer continues to pay for Mr. Coleman’s pain management services. Unfortunately, when he became Medicare-eligible a few years ago, CMS demanded conditional payments for items and services billed by his private and personal family physician who treats him for an occasional upper respiratory infection, chronic diabetes, and esophageal reflux disease. The example below shows one of many similar dates of service. In this instance, $76.34 was demanded as a conditional payment CMS made related to the claim for one date of service:


ORM is open for a lifetime for his low back pain. The WC statute permits the employer the choice of treating physician and states medical services provided by an unauthorized physician are not covered and will not be reimbursed by the employer. Both the employee and the unauthorized physician were notified the unauthorized provider would not be reimbursed pursuant to state WC statute. Unfortunately, his family physician continues to include one ICD code for each semiannual office visit.

It continues to be the practice of CMS to seek full reimbursement for a conditional payment as long as one diagnosis code is related. Although only applicable in California and not precedent case law, CIGA v. Burwell, 2017 WL 58821, (C.D. California, January 5, 2017) held that the state law that controls the underlying claim determines whether a workers’ compensation payer has a "responsibility to make payment" for an "item or service" rather than the Medicare Secondary Payer Act. In addition, when the case was appealed, CIGA v. Price, 2017 WL 1737717 (C.D. California, May 3, 2017) issued a limited prospective order declaring CMS’ interpretation of the term "item or service" in relation to its billing practice unlawful. The case is set for trial in September 2017. We continue to raise these issues since the insurer/TPA is not entitled to obtain unrelated, private medical records that can be used to show that the reason for the provider encounter and the diagnoses being treated are all unrelated to the worker’ compensation claim.

Adverse Consequences That May Not be Readily Apparent:

Patterns of practice to take into consideration and revisit at various times during the life of the claim:

  1. Did I input ICD diagnosis codes into my claims database or Section 111 MIR system before the claimant was Medicare eligible?
  2. Do I know whether ICD diagnosis codes, ORM, or TPOC automatically transmit to CMS when
  • a claimant is not Medicare eligible,
  • after a claim is administratively closed, or
  • the claim has been denied?
  1. Does my claims database require I assume ORM in order to pay an expense on the claim file regardless of whether the claim is compensable or denied?
  2. Did I assume ORM on a case in which there may have been no-fault coverage but NO no-fault claim was ever presented for payment?
  3. Did I inadvertently report ORM on a claim that had been denied? Is that the reason why I received this conditional payment notice (CPN)?
  4. Have I inadvertently forgotten to terminate ORM when
  • medical benefits were settled,
  • when a WC claim was denied, or
  • when a causation judicial decision was made?
  1. Were ICD codes obtained from provider bills that had been approved for payment used as a means of selecting which ICD codes to report via Section 111 MIR? If so, re-review and correct if needed.
  2. For Section 111 MIR purposes, did I select ICD codes for diagnoses
  • deemed to be compensable?
  • consistent with the injuries claimed and are being treated?
  • identifying injuries being released when settled?

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