Category Archives: Legal Matters

CMS Position on Independent Medical Reviews

Prior to the release of the latest Workers’ Compensation Medicare Set Aside (WCMSA) Reference Guide, the Centers for Medicare and Medicaid Services (CMS) would generally defer to the findings of the Independent Medical Review (IMR) and exclude the denied treatment or drugs. However, since the release of the WCMSA Reference Guide, we are seeing CMS include treatments and medications denied by IMR citing a lack of a documented alternative treatment plan. Further clarification was provided stating “The CMS position is not whether a carrier demonstrates liability, but whether Medicare would reasonably pay for something in the future that should have been covered as it related to the workers’ compensation claim.” In situations involving denied treatment, CMS seeks an “alternative treatment that would be acceptable through the IMR process.”

It is the underlying state workers’ compensation law providing the legal authority controlling Medicare’s recovery rights rather than the Medicare Secondary Payer Act. Medicare’s rights arise from the underlying state law governing the claim granting property rights to parties based on issues of compensability. This is supported by the cases listed below:

In Caldera v. The Insurance Company of the State of Pennsylvania, 716 F.3d 861 (5th Cir. 2013), the Court held the Medicare Secondary Payer Act does not go as far as to eviscerate all state law limitations on workers’ compensation payments.

The California Court in CIGA v. Burwell, 2017 U.S. Dist. LEXIS 1681 (decided January 5, 2017) and CIGA v. Price, U.S. Dist. LEXIS 67589 (May 3, 2017), to be appealed again in 2017 (not precedent setting yet), the court ruled state law creates Medicare’s recovery rights based on concepts of what is compensable versus what is not compensable. The law does not permit Medicare to recover conditional payments for items and services deemed to be unrelated to the compensable workers’ compensation (WC) claim.

In addition and specifically pertaining to California, the 3rd District Court of Appeals has issued a decision in Ramirez v. W.C.A.B., again upholding the constitutionality of the IMR process for Utilization Review determinations. Ramirez is the third in a series of cases where applicant attorneys have attempted to challenge the constitutionality of the IMR process. In these cases, the Court goes on to state:

“To the extent the Board has any jurisdiction to review a utilization review as provided by this regulation, it has jurisdiction only over nonmedical issues such as timeliness of the utilization review as stated in the Final Statement of Reasons and Dubon II. We are not presented with a nonmedical issue. Any question that has the effect of assessing medical necessity is a medical question to be conducted by a qualified medical professional by way of independent medical review (IMR). (California Labor Code § 4610.6, subd. (i) [“In no event shall a workers’ compensation administrative law judge, the appeals board, or any higher court make a determination of medical necessity contrary to the determination of the independent medical review(IMR) organization.”].) Whether the utilization reviewer correctly followed the medical treatment utilization schedule is a question directly related to medical necessity, and is reviewable only by independent medical review.”

In light of CMS’ recent change in position regarding IMR determinations and until there is a formal MSA appeals process, we recommend carriers and Third Party Administrators (TPAs) evaluate cases involving IMRs to determine whether there is an alternative treatment plan adopted by the prescriber and how this may impact an MSA. If an alternative treatment plan has not been established, Optum can assist by having our clinical staff evaluate the claim and discuss the case with the prescriber (if applicable) to collaborate on clinically appropriate and cost-effective treatment alternatives.

Each case should be evaluated individually to determine the best course of action in reference to an MSA, while considering the carrier, TPA, employer risk tolerance and internal procedures. At Optum our knowledgeable staff of professionals are here to assist clients with all their MSP compliance needs.

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?

You Are Being Watched

All non-group health plans (NGHP) including all property & casualty insurers who insure auto no-fault (Med Pay/PIP) claims, workers’ compensation claims, premises Med Pay claims, get your assumption and/or termination of ongoing responsibility for medicals (ORM) reporting in order, a firm called MSP Recovery is coming after you. A recent 11th Circuit decision in MSPA Claims 1, LLC v. Ocean Harbor Casualty Insurance (Case No. 2015-1946-CA 06) is granting class certification paving the way for recovery of millions of dollars for Medicare or Medicare Advantage plans nationwide.

According to a recent article in Daily Business Review, MSP Recovery, LLC, has the ability to determine if someone who has an incident, such as a car accident or a slip-and-fall and an insurance carrier has reported assumption of ongoing responsibility of medicals (ORM) to the Centers for Medicare and Medicaid Services (CMS) for primary payer responsibility .

MSP Recovery, LLC has developed a sophisticated system to identify no-fault claims by collecting and matching data including CMS reports, police reports, ambulance transport records, insurance declaration sheets, and no-fault personal injury protection/medical payout sheets.

MSP Recovery, LLC plans to file lawsuits across the country on behalf of many Medicare Advantage plans (MAPs) to recover conditional payments in which an applicable plan has demonstrated responsibility to pay by assumption and reporting to CMS of ORM.

Your Data is Being Mined

Presumably, MSP Recovery, LLC is able to use the Medicare Secondary Payer Recovery portal (MSPRP) to identify specific Medicare beneficiaries that have had ORM reported from the police or ambulance reports.

For commercial general liability policies covering premises slip and fall cases, if there is a no-fault/med pay policy provision, then the applicable plan is required to report ORM via Section 111 mandatory insurer reporting (MIR). If a med pay claim is made by the Medicare beneficiary after being treated, these claims can be identified via an ISO Claim Search subscription.

Since compensable workers’ compensation claims involving Medicare beneficiaries are required to report to CMS assumption of ORM, state departments of industrial relations may be accessed as well.

What do I do to avoid being brought into a Class Action?

Do not assume and report ORM if a no-fault claim has not been made by a Medicare beneficiary, where no treatment is sought, or if there is a legitimate statutory or coverage basis for the claim denial.

Do not forget to report to CMS an accurate ORM termination date. ORM should be terminated when policy limits have been exhausted, the policy period has expired, when CMS has approved an MSA after settlement, when there is a settlement that included medical expenses, or where there is a judgment or arbitration award that has occurred that disposed of related medical expenses.

Do not ignore or refuse to pay Medicare or MAPs who have demanded or notified you of potential conditional payments you may owe.

When in doubt, consult us. For questions, please contact Optum Settlement Solutions Division at 888-672-7674 or contactus@helioscomp.com

The SPARC Act and Compliance with Medicare Advantage plans PART D prescription drugs

Haro v. Sebelius- Medicare Conditional Payment CollectionIn September, Congressman Tim Murphy (R-PA) and Congressman Ron Kind (D-WI) introduced bipartisan legislation into the U.S. House of Representatives to improve the Medicare Secondary Payer (MSP) Act as it pertains to the Medicare Prescription Drug (Part D) program. The Secondary Payer Advancement, Rationalization and Clarification (SPARC) Act (H.R. 6120) would clarify the Part D Medicare Secondary Payer (MSP) provisions with specific parameters to follow when resolving claims that involve Medicare beneficiaries who have related claims that were paid by Medicare Part D insurance plans.

The SPARC Act is anticipated to diminish the ambiguity associated with the Medicare Secondary Payer (MSP) claim compliance process and allow for efficient repayment of amounts owed from claims to be paid directly to the Medicare Part D Prescription Drug Plans (PDPs). Since the MSP provisions of the Social Security Act prohibit Medicare from making payment where payment has already been made or can reasonably be expected to be made by a primary plan, the payments made by the Part D plan are paid conditionally, with the expectation that the conditional payments would be reimbursed, once primary payment responsibility is demonstrated by accepting ongoing responsibility for medical (ORM) expenses and/or by settlement, judgment or award.

Current Medicare beneficiaries with workers’ compensation, no-fault, and/or liability claims experience uncertainty and delays in settling claims, because it is difficult to find out how much money has to be repaid to Part D Plans upon settlement. As such, the Part D plans are not promptly reimbursed for medications prescribed to Medicare beneficiaries that are related to the treatment of their injuries.

  • Expedited repayment procedures proposed by the SPARC Act are designed to avoid wasting claim, judicial, governmental and taxpayer resources, not to mention the Medicare Trust Fund. The SPARC Act would:
  • Require the Centers for Medicare and Medicaid Service (CMS), to convey settlement information to Part D Plans, coordinating benefits within 15 days of receipt
  • Require Part D drug plans to instruct pharmacies to bill entities that have accepted ORM benefits
  • Prevent Part D plans from paying for prescription medication when other plans are responsible

If the SPARC Act passes, it is expected to enable Medicare beneficiaries to settle claims sooner. It will also enable insurers to resolve claims quicker, with greater certainty, and the Part D Prescription Drug Plans, as well as the Medicare Trust Fund, will be efficiently reimbursed.

The bill, however, doesn’t specify how workers’ compensation insurers should account for the shifting of pharmacy costs to Medicare post settlement. It seems that injured workers would want apportion a part of the total settlement amount toward related prescription costs needed in the future; however, the SPARC Act, as written, would make workers’ compensation insurers responsible for prescriptions reimbursement until the settlement of a Medicare beneficiary’s workers’ compensation claim. Afterward, Medicare’s Part D plan would become the primary payer, thus eliminating the need for the workers’ compensation Medicare Set-Aside (WCMSA) arrangement to allocate for prescription drugs otherwise covered by the Part D plan. Regardless, many state workers’ compensation statutes may still require prescriptions to be allocated in the WCMSAs even if SPARC Act is enacted.