Tag Archives: conditional payments

Major Changes to Conditional Payment Reimbursement Process for Entities that Have Accepted ORM

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

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

iStock_000003223396XSmall_webAs those of you who follow us regularly on this blog know, on August 5, 2015, we anticipated that after the Center for Medicare and Medicaid Services (CMS)’ announcement of the transition to the Commercial Repayment  Center (CRC) for reimbursement of conditional payments (CP) directly from applicable plans (AP) who have accepted ongoing responsibility for medical (ORM), there would be major changes coming to the conditional payment resolution process. Sure enough, on August 25, 2015, CMS held a webinar to inform stakeholders on the new role of the CRC in the Non-Group Health Plan (NGHP) conditional payment recovery process.

In keeping with their July 1, 2015, and July 29, 2015 announcements, CMS again indicated that “as part of CMS’ continuing efforts to improve the Coordination of Benefits & Recovery (COB&R) program and claims payment accuracy in Medicare Secondary Payer (MSP) situations, CMS will be transitioning a portion of the NGHP recovery workload from the Benefits Coordination & Recovery Center (BCRC) to its CRC.” During the webinar, CMS announced that “effective October 5, 2015, the CRC will assume responsibility for the recovery of conditional payments where CMS is pursuing recovery directly from a liability insurer (including a self-insured entity), no-fault insurer or workers’ compensation entity (LNFWC) as the identified debtor.  In other words, the CRC will identify and validate recoverable conditional payments, issue conditional payment notices (CPNs) and demand letters, respond to disputes and appeals, receive payments and resolve outstanding debts, and refer delinquents debts to the Department of Treasury (DOT) for further collection actions.”

At the 8/25/15 webinar, CMS indicated that the BCRC will continue to maintain responsibility for “all data collection activity, including Mandatory Insurer Reporting (MIR) information. It will also continue to pursue recovery from the beneficiary directly and continue to seek recovery on cases that initiated prior to October 5, 2015 where an AP is the identified debtor. Therefore, the BCRC will continue to provide conditional payment letters (CPLs) when a beneficiary self reports that a LNFWC entity has primary payment responsibility for an illness, incident, or injury where Medicare has made a conditional payment. Such CPLs will include conditional payments on a Payment Summary Form,  will explain how to dispute payments made by Medicare, and will advise the AP how to move the recovery to final demand.”

In contrast, CMS also informed that “the CRC will be the one issuing CPNs when LNFWC entities indicate through MIR that it has ORM. The CPN will include conditional payment information on a Statement of Reimbursement (SOR) with items or services paid by Medicare it seeks to recover, will  explain how to dispute any item or service included in the SOR, and will advise insurers and entities what further actions need to be taken.”

During the webinar, CMS made it clear that “both CPLs and CPNs are not requests for payment. They are information provided to the LNFWC entity for an opportunity to ensure an accurate listing of conditional payments. Therefore, if an AP believes a medical claim should be removed from the CPL or CPN, a dispute may be filed with proper documentation to challenge such payment. A major difference between CPLs and CPNs however is that although there is no time limitation when responding to a CPL, the LNFWC entity must file the dispute within 30 days of the CPN date.”

Yes, you read that right! If the CRC sends a LNFWC entity a CPN seeking reimbursement for conditional payments Medicare believes to be related to the accident, incident, or injury, the AP has 30 days from the date of the CPN to respond or dispute such payments. “The AP may file a dispute by contacting the CRC in writing or through the Medicare Secondary Payer Recovery Portal (MSPRP). Disputes submitted to the CRC via the portal may only be submitted on the basis of relatedness and in response to a CPN; all other disputes must be submitted in writing. Yes, that means that if the LNFWC entity has more than one dispute in the same case, for example relatedness to the case and claims paid to the provider, the dispute must be submitted in writing, not through the portal.”

During the webinar CMS also clarified that upon filing a dispute, the CRC will review and evaluate the dispute. The CRC has the authority to remove any medical claim from the SOR if the CRC agrees with the LNFWC entity that such payment is not related to the claim at hand, or to the condition related to the claim at hand. “Any medical claim that remains in the SOR will then be included in the demand letter (DL). Any new medical claim that may have been received during the dispute and review process will also be added to the recovery amount and included in the DL.”

CMS also indicated at the webinar that if no dispute is received following a CPN, or if after dispute, the SOR contains one or more medical claims Medicare believes to be due, the CRC will issue a DL to the AP. The DL will include “basic information regarding the case, an updated SOR with a final listing of the items or services Medicare expects reimbursed, and an explanation of how to appeal any items and or services the LNFWC entity believes should be removed from the SOR.”

As we blogged on April 24, 2015, as a result of the Strengthening Medicare and Repaying Taxpayers (SMART) Act, LNFWC entities are now afforded a formal multilevel appeal process. It includes an “initial determination” (the MSP recovery demand letter), a “redetermination” by the contractor issuing the recovery demand, a “reconsideration” by a Qualified Independent Contractor (QIP), a hearing by an administrative law judge (ALJ), a review by the Departmental Appeals Board’s Medicare Appeals Council (MAC), and judicial review. Therefore, if after dispute, a LNFWC entity still believes an item should be removed from the SOR, then such AP may appeal same using this process.

As a result of technical difficulties throughout the presentation and not being able to answer all of the questions, issues, and concerns from those attending, CMS concluded the webinar by indicating it will hold another webinar on September 17, 2015.

Considering these significant changes, their potential impact on your claims, and effect on your bottom line, if you haven’t already, this is a perfect time to make sure that your Mandatory Insurer Reporting data is accurate, that your ORM process is working smoothly, that your transition to ICD-10 is on track, and that your MSP vendor is ready for these changes. Now more than ever, all liability insurers, self insured, no-fault insurers, and workers compensation entities must prepare themselves for a new conditional payment reimbursement world, a world in which if such applicable plan has accepted ongoing responsibility for medical, Medicare will no longer wait for settlement, judgment or award to seek reimbursement of conditional payments made related to the claim, but will seek reimbursement, possibly more than once, while the claim is still open. Whether such conditional payments exist before or after October 5, 2015, Helios Settlement Solutions is prepared to assist clients communicating, disputing, and appealing such conditional payments with the Commercial Recovery Center, as well as the Benefits Coordination Recovery Center. As we have been doing successfully for years, our Conditional Payments Resolution team is ready to continue to help clients with cases where CMS is pursuing recovery from the self insured, liability insurer, no-fault insurer or WC entity directly.  As always, we will continue to monitor these issues and be sure to report on any changes, including items discussed in CMS’ planned September 17, 2015 webinar.

Despite Settlement, Which Included Resolution of Conditional Payments, Florida Federal District Court Finds Insurer to be Primary Payer and Awards Double Damages to MAP

RafealOn March 16, 2015, the United States District Court for the Southern District of Florida published its opinion on Humana Medical Plan v. Western Heritage Insurance Company, finding that as a matter of law, Humana is entitled to maintain a private cause of action for double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A) against Western Heritage, the primary payer in this matter. Since the MSP Act private cause of action makes it clear that double damages attach, the Court awards Humana $38,310.82, double the $19,155.41 it had paid in medical benefits related to the slip and fall claim from which such payments were born.

Mrs. Reale (Reale) was enrolled in a Humana Gold Plus Medicare Advantage Plan (Humana) when she sustained injuries in a slip-and-fall accident at Hamptons West Condominiums (Hamptons West) on or about January 21, 2009. Mrs. Reale received medical treatment for her injuries. Her healthcare providers billed charges totaling $74,636.17. Humana payed $19,155.41 for such medical charges.

Mrs. Reale then filed a personal injury action against Hamptons West on June 1, 2009. As Hamptons West’s liability insurer, Western Heritage Insurance Company (Western Heritage) entered into a settlement agreement with Mrs. Reale to resolve all issues regarding liability for a sum of $115,000.00. In that settlement agreement, Mrs. Reale attested that she had no outstanding Medicare liens that could represent a lien or claim against the proceeds she received from Western Heritage. Additionally, a letter from CMS dated December 3, 2009 confirmed that CMS had no record of processing Medicare claims on behalf of Mrs. Reale.

Western Heritage eventually learned of Humana’s lien rights and attempted to include Humana as a payee on its draft settlement agreement with Mrs. Reale. However, Mrs. Reale opposed Western Heritage’s attempts to include Humana as a payee on the settlement check because she disputed the amount of Humana’s lien. The state court judge ordered Hamptons West to tender full payment to Mrs. Reale without including any lien holder on the settlement check. The judge simultaneously ordered Mrs. Reale’s counsel to hold sufficient funds in a trust account to be used to resolve all medical liens. As a result of the state court order, Western Heritage tendered the full settlement amount to Mrs. Reale, with the understanding that Mrs. Reale and her attorney would reimburse Humana.

Humana and Mrs. Reale failed to agree on the amount Humana was to be reimbursed so Humana brought suit against Mrs. Reale and her attorney in the United States District Court for the Southern District of Florida on May 7, 2010. After the Court ruled that Humana did not have the same rights and authority as the US government did to file a private cause of action under the Medicare Secondary Payer Act to recoup conditional payments, Humana filed a Notice of Voluntary Dismissal of its action against Mrs. Reale and her attorney on November 9, 2011.

Mrs. Reale then brought suit against Humana in Miami-Dade County, Florida seeking a declaration of the exact amount she owed Humana. The state court found that Mrs. Reale had recovered 33.75% of the full value of her claims in her settlement with Western Heritage and therefore had recovered 33.75% of the total benefits paid by Humana, or $6,464.95. The state court then further reduced that number by 43%, taking into account the pro-rata share of fees and costs incurred in securing the settlement agreement, thus holding that Humana was entitled to reimbursement in the amount of $3,685.03. Humana has appealed the determination of the state trial court to the Third District Court of Appeals, but that court has not yet rendered a decision.

Humana then filed the instant action against Western Heritage on May 7, 2010. Right away, Humana filed a Motion for Summary Judgment seeking (1) a declaration that Western Heritage remains liable to Humana under the Medicare Secondary Payer Act even though it already settled all claims directly with Mrs. Reale and (2) double damages from Western Heritage under the Medicare Secondary Payer Act’s private cause of action provision.

The MSP provisions provide that Medicare cannot pay medical expenses when “payment has been made or can reasonably be expected to be made under a workman’s compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or no fault insurance.” 42 U.S.C. § 1395y(b)(2)(A)(ii). If a primary plan “has not made or cannot reasonably be expected to make payment,” the Secretary is authorized to make a conditional payment. 42 U.S.C. § 1395y(b)(2)(B)(i). However, since Medicare remains the secondary payer, the primary plan must then reimburse Medicare for all conditional payments. 42 U.S.C. § 1395y(b)(2)(B)(ii).

The Medicare Secondary Payer Act (MSP Act) affords secondary plans a remedy against primary payers who fail to satisfy their obligations to make primary payments or to reimburse conditional Medicare payments. It does so by establishing two causes of action against noncompliant primary plans. The first cause of action belongs exclusively to the United States, which “may bring an action against any or all entities that are or were required or responsible…to make payment…under a primary plan.” 42 U.S.C. § 1395y(b)(2)(B)(iii). The second cause of action is a private cause of action with no particular plaintiff specified indicates “there is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).” 42 U.S.C. § 1395y(b)(3)(A).

Regulations issued by CMS make clear that the provision extends the private cause of action to MAOs. Those regulations state that “MAOs will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations in subparts B through D of part 411 of this chapter.” 42 C.F.R. § 422.108. Moreover, CMS directors sent out a memorandum on December 5, 2011 reasserting that “notwithstanding recent court decisions, CMS maintains that the existing MSP regulations are legally valid and an integral part of Medicare Part C and D programs.” Ctrs. for Medicare and Medicaid Svcs., Dep’t of Health and Human Svcs. Memorandum: Medicare Secondary Payment Subrogation Rights (Dec. 5, 2011).

While the Eleventh Circuit has not yet addressed the issue of whether a Medicare Advantage Organization, such as Humana, may bring a private cause of action against a primary plan under the secondary provision of the Act, the Third Circuit has addressed the issue and held that it can. See In re Avandia, 685 F.3d at 359.

The Ninth Circuit has also addressed whether an MAO has a private right of action to pursue reimbursement under the MSP Act. See Parra, 715 F.3d at 1154-55. It found that the MSP Act does not create a private right of action, but instead, affords MAOs the right to establish such rights within their contracts.

Western Heritage argues that this Court should follow Parra and “interpret the Medicare Act as not providing a private right of action in favor of MAOs such as Humana.” The Court here however finds the facts of Parra distinguishable from the facts of the case at hand, and its holding, inapplicable. The Court finds the Third’s Circuit’s analysis regarding the ability of an MAO to bring a private cause of action under the MSP Act to be persuasive. The statutory text of the MSP Act clearly indicates that MAOs are included within the purview of parties who may bring a private cause of action.

Having determined that MAOs, such as Humana, may maintain a private cause of action under the MSP Act, the Court turns to whether Humana may bring this particular cause of action against Western Heritage, given that Western Heritage has already directly settled all claims with Mrs. Reale, the Medicare beneficiary.

Humana argues that Western Heritage, as a primary payer under the MSP Act, is responsible for reimbursing the Medicare benefits Humana advanced on behalf of Mrs. Reale. In this case, Western Heritage, as Hamptons West’s liability insurer, entered into a settlement agreement with Mrs. Reale to resolve all personal injury claims she had against Hamptons West. That settlement agreement, wherein Western Heritage reimbursed Mrs. Reale for medical expenses she incurred as a result of injuries she sustained at Hamptons West, demonstrates Western Heritage’s responsibility under the MSP Act to reimburse Humana for the Medicare benefits it paid on behalf of Mrs. Reale. Thus, Western Heritage is a primary payer under the provisions of the MSP Act and is responsible for reimbursing the Medicare benefits Humana advanced, even in light of its agreement with Mrs. Reale settling all claims.

Pursuant to the MSP Act’s private cause of action, the Court finds Humana has a right to recover from Western Heritage the benefits it paid on behalf of Mrs. Reale and is statutorily entitled to recover an amount double what it paid on behalf of Mrs. Reale. Additionally, “if Medicare is not reimbursed as required by paragraph (h), the primary payer must reimburse Medicare even though it has already reimbursed the beneficiary or other party.” 42 C.F.R. § 411.24(i)(1). Therefore, the Court concludes that after Western Heritage became aware of payments Humana advanced on behalf of Mrs. Reale, it had an obligation to independently reimburse Humana. Because it didn’t, the Court rules that as a matter of law, Humana is entitled to maintain a private cause of action for double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A) and is therefore entitled to $38,310.82 in damages.

As this case clearly shows, it is no longer advisable for payers to resolve Medicare conditional payments in state courts, or count on opposing counsel to hold funds in trust to reimburse such liens. As we recommend to all of our clients, there is no substitute for identifying the existence of Medicare Part A, B, C, or D conditional payments early on and following the administrative process set by CMS or by the Advantage Plan or Prescription Drug Plan to make certain compliance is reached. Whether a work comp or liability case, at Helios, we can assist with early identification and resolution of such liens.

Summary of Final Rule: Conditional Payment Appeals Process for Applicable Plans

On February 27, 2015, CMS published in the Federal Register the SMART Act Appeal Final Rule which can be located at 80 Fed. Reg. 10611. The rule can be found here and will go into effect on April 28, 2015. CMS had previously issued the Proposed Rule on this very topic on December 27, 2013. Materially, the Final Rule is effectively the same as the Proposed Rule without substantive change. While some greater strides toward more operational efficiencies could have been made in finalizing the Final Rule, Helios applauds CMS finalizing this proponent of the SMART Act within two years of the law’s enactment.

What the Final Rule does: The Final Rule puts into place a conditional payment appeals process for “applicable plans.” An applicable plan means liability insurance (including self-insurance), no-fault insurance, or a workers’ compensation law or plan. Prior to implementation of this Final Rule, applicable plans had no appeal rights with regard to conditional payment demands from Medicare. With this final rule in place, applicable plans can now appeal final conditional payment demands issued by Medicare if the applicable plan disputes the amount or liability owed.

How the Appeals Process will work: Applicable plans’ appeal rights are the same process that beneficiaries, providers and others must use to dispute a conditional payment demand. It is a four-level appeals process which requires that the applicable plan exhaust its rights in the following order: (1) reconsideration of a claim by the CMS contractor; (2) evaluation of the claim by a Qualified Independent Contractor (QIC); (3) adjudication of the dispute by an Administrative Law Judge (ALJ); (4) and lastly a review of the ALJ decision by the Department Appeals Board’s Medicare Appeals Council. It has been noted that this current four-level appeals process can take up to four years to pursue. It was requested that CMS simplify this appeals process and skip the first two levels; however, CMS declined this suggestion.

What is Not Subject to Appeal: Through the rulemaking process, industry stakeholders requested that CMS allow applicable plans to appeal issues other than the conditional payment amount. In particular, it was requested that CMS allow the applicable plan to dispute who or which entity that CMS would pursue an MSP recovery from. CMS declined this request, citing its authority within the MSP to recover from the beneficiary, the primary payer or any other entity receiving proceeds from the payment by the primary plan. Stakeholders also requested that an applicable plan be able to appeal an initial conditional payment demand, even if the final amount of the repayment was not yet available in a Final Demand letter. CMS also declined this request; Applicable Plans may only appeal from Final Demands.

Who May Appeal: It was requested that either the applicable plan or the beneficiary be able to appeal where the identified debtor is either the applicable plan or the beneficiary. CMS declined this request and has stated that the Final Rule makes appeal rights available to the identified debtor, not potential identified debtors. Therefore, applicable plans may only appeal under this process if they are the identified debtor in the Final Demand letter. Additionally, beneficiaries may only appeal under previously existing conditional payment processes if the beneficiary is the identified debtor in the Final Demand Letter.

Commenters also had requested that applicable plans be able to appoint third parties/agents as representatives in the appeals process. CMS contends that applicable plans already have this right, and further specified that the party appointing a representative must include the beneficiary’s Medicare health insurance claim number (HICN) on the appointment of representation.

Notice of Appeal: It was also requested that either the applicable plan should be copied on a recovery demand with the beneficiary as the identified debtor; or all potential debtors should be copied on all actions (that is, recovery demands, appeal requests, all notices or decisions). CMS declined this request citing that additional notice would not be necessary since only the identified debtor can appeal the Final Demand. Additionally, it would cause “an increase in administrative costs and would cause confusion in many instances, particularly where beneficiaries would receive copies of demands issued to applicable plans.”

Medicare Advantage Plan Conditional Payment Appeals: Commenters requested that the proposed rule be revised to include appeal rights for applicable plans when a Medicare Part C organization or Part D plan pursues an MSP based recovery from the applicable plan. CMS stated that the request was outside the scope of the rule and that the SMART Act provision for applicable plan appeals amended only the MSP provisions for Medicare Part A and Part B.

MSA Appeals: It was requested that the proposed rule should address appeals related to the determination of WCMSA amounts for future medicals. CMS stated that this issue is outside of the scope of the rule and that this particular issue would be addressed separately. As an aside, if CMS does create an appeals process for MSAs, it would likely be created outside of the legislative process which could allow for the appeals process to be implemented more quickly.

In summary, the Final Rule provides a much needed conditional payment appeals process for Applicable Plans. While the four-level appeals process may be rumored to be slow, Applicable Plans now have the same rights of appeal that previously only existed for others in the Medicare program. The SMART Act is continuing to steadily create a more efficient process and reform the MSP system.

CMS Issues Final Rule Establishing Conditional Payment Appeals Process Pursuant to the SMART Act

We previously had posted a blog that CMS had issued a proposed rulemaking regarding an appeals process to be utilized by applicable plans for conditional payment disputes. For background on the rulemaking and to view our prior blog, please click here.

Today, CMS issued a final rule implementing provisions of the Strengthening Medicare and Repaying Taxpayers Act (the SMART ACT), which establishes a right of appeal and formal Medicare Secondary Payer (MSP) appeals process for applicable plans, for situations where the Secretary seeks to recover payments from applicable plans. Applicable plans include liability insurance (including self-insurance), no-fault insurance, and workers’ compensation laws or plans. The SMART Act further requires that the Medicare beneficiary who received the items and/or services in question be notified of the applicable plan’s intent to appeal.

CMS has not yet published the final rule in the Federal Register. Once the final rule is published, we will provide more specific feedback and guidance on the final rule.