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Medicare

Arkansas Blue Cross Blue Shield Lupron Payments

Outcome:    Very favorable

Also under Payment issues (for physicians)

Issue
The issue in this administrative proceeding was whether a Medicare fiscal intermediary could recover alleged overpayments it had made to physicians for prescription medications, when the physicians were without fault and the fiscal intermediary had implemented ambiguous and inconsistent payment policies.

AMA interest
The AMA opposes unfair and untimely efforts by payers to recover money paid to physicians for their services, particularly if the physicians continued to render services or incur expenses under the good faith belief that the money they were being paid was the amount they were entitled to receive.

Case summary
Approximately 120 urologists, oncologists, and other physicians (located primarily in Oklahoma and New Mexico), resisted an attempt by Blue Cross & Blue Shield of Arkansas (Arkansas Blue), a Medicare fiscal intermediary, to secure a refund of alleged overpayments made for Lupron. Fiscal intermediaries operate under directives from the federal Centers for Medicare & Medicaid Services (CMS), which funds Medicare. Lupron, most commonly prescribed by urologists and oncologists, is a drug used to treat prostate cancer, among other medical conditions. Because prostrate cancer is an age-related illness, many of the patients using it are covered by the Medicare program.

Beginning in July, 2001, Arkansas Blue announced that it would no longer reimburse physicians who administered Lupron at the Lupron average wholesale price. Instead, Arkansas Blue would pay at the scheduled rate for a less expensive drug, Zoladex, which Arkansas Blue claimed was equally effective. These announcements, however, were ambiguous and inconsistent, and Arkansas Blue continued to pay physicians at the Lupron price through approximately March, 2003.

In April, 2004, Arkansas Blue sent letters to physicians within its coverage area advising them of overpayments for Lupron and requesting records pertaining to Lupron usage as a basis for refund of the supposed overpayments. Arkansas Blue claimed the overpayments ranged from around $10,000 to $200,000 per physician. The total refund claim came to several million dollars.

Under the Medicare laws, if an amount paid to a provider of services is beyond the amount allowable under those laws, the excess may be recovered from the provider, subject to certain exceptions. One of those exceptions is that an overpayment may not be recovered if "such provider of services … was without fault with regard to the payment of such excess over the correct amount." The physicians argued that they were "without fault" and therefore had no obligation to repay the alleged overpayments. They further argued that, due to the ambiguities and inconsistencies of the Arkansas Blue payment policies, coupled with its continued reimbursement at Lupron rates, the physicians could not have been expected to know that they would only be paid at Zoladex rates.

Ultimately, CMS accepted the physicians’ "without fault" argument. As a result, CMS sent letters to the physicians who protested the repayment letters, stating that it would not allow Arkansas Blue to recoup the supposed overpayments.

Litigation Center involvement
The Litigation Center contributed toward the physicians' legal expenses.

Bagnall v. Sebelius (2d Cir.)

Issue

The issue in this case is whether the Medicare Program had properly classified certain patients who were hospitalized for more than one day as “outpatients’ or on “observational status,” rather than as “inpatients,” because those patients had not been formally admitted in their hospitals.

AMA interest

The AMA believes that physicians should make admission determinations based on medical necessity rather than financial considerations.

Case summary

The plaintiffs in this lawsuit, all of whom were Medicare beneficiaries, had been hospitalized for more than one day – most had been hospitalized for several days. The plaintiffs had been denied Medicare Part A benefits, which are only available to hospital inpatients. Although the plaintiffs received the full range of medical and hospital services available to inpatients, Medicare said they should be deemed on observational status because they had not been formally admitted. Two of the plaintiffs actually had been formally admitted, but their hospitals’ utilization review committees had retrospectively rescinded the admission decisions. By virtue of their disqualification from Medicare Part A benefits, the plaintiffs incurred significant out-of-pocket health care expenses.

Several Medicare beneficiaries sued the Secretary of the Department of Health and Human Services (HHS) in the United States District Court for the District of Connecticut. The case sought to compel the Centers for Medicare & Medicaid Services (CMS) to revise its policies regarding outpatient/inpatient/observation status. Numerous legal theories were raised, including a claim that CMS had violated the Fifth Amendment Due Process Clause.

The plaintiffs contended that CMS imposed financial penalties on hospitals which categorize patients as inpatients, if a subsequent audit indicates that only outpatient status was justified. In such event, the hospitals receive nothing. Therefore, hospitals have been incentivized to mischaracterize observation status. Moreover, physicians may be pressured to sign orders, provided by hospitals and based on proprietary systems developed by, which may then be used retrospectively to determine if an admission was appropriate.

HHS moved to dismiss the complaint for lack of jurisdiction and failure to state a cause of action. The trial court found that it did have jurisdiction over the claims, even as to those plaintiffs who had failed to exhaust their administrative remedies. It found that HHS could have waived the exhaustion requirement, and its failure to do so was “inappropriate.” Therefore, the court would deem the exhaustion requirement to have been waived.

However, the trial court agreed with HHS that the plaintiffs had not stated a cause of action. As to the Due Process claim, the court held that inpatient status is a discretionary decision of hospitals and physicians. Because of that discretion, the plaintiffs did not have a vested property interest in their inpatient status. Having determined that the plaintiffs lacked a property interest in their characterization as inpatients, the court did not reach the other elements of the Due Process claim.

The court ordered all claims dismissed and entered judgment for HHS. The plaintiffs have appealed to the Second Circuit, but only on limited issues. One of these is the constitutional Due Process claim.

Litigation Center involvement

The Litigation Center, along with the Connecticut State Medical Society and several specialty medical societies filed an amicus brief in support of the plaintiffs and urging reversal.

United States Court of Appeals for the Second Circuit brief

Children's Healthcare is a Legal Duty v. HCFA, 212 f.3d 1084 (8th Cir. 2000)

Outcome:     Very unfavorable

Also under Christian Science

The American Academy of Pediatrics, the Litigation Center, the Iowa Medical Society, and the American Nurses Association joined in an amicus curiae brief to challenge the validity of certain provisions of the Balanced Budget Act of 1997 under the First Amendment.  The law provides Medicare and Medicaid reimbursement for services provided in “religious nonmedical health care institutions,” 42 USC §1395x (ss), a euphemism for Christian Science sanitaria. The lower court upheld the statute, and so Children’s Healthcare Legal Duty, Inc. (CHILD) appealed the case to the Eighth Circuit.  The amicus brief argued that the statute implies that spiritual healing is on a par with medical care.  Moreover, the federal support of these institutions facilitates medical neglect of children.  The AMA, by special permission of the court, participated in the oral argument.

By a 2-1 decision, a three-judge panel of the Eighth Circuit affirmed.  CHILD then petitioned the United States Supreme Court for certiorari.  The Litigation Center joined the American Academy of Pediatrics and other non-profit organizations in an amicus brief in support of CHILD’s petition.  However, the Supreme Court denied CHILD’s petition.

McCreary v. Offner, 172 F.3d 76 (D.C. Cir. 1999)

Outcome:    Very unfavorable

Also under Medicaid and Payment issues (for physicians)

A number of state Medicaid programs adopted policies that limited or denied Medicaid reimbursement of Medicare Part B copayments for patients who qualify under both Medicare and Medicaid.  The issue in this case was whether, in the event of such dual qualification, the states had to pay at the higher Medicare rates, or whether they could pay at the lower Medicaid rates.  All four federal circuits that considered the issue prior to 1997 found that the state programs violated federal law and they were required to pay copayments based on the higher Medicare rates.

In January 1997, the Litigation Center, in states affected by these policies, began helping its members resolve their physician members’ Medicaid reimbursement shortfalls through negotiation with Medicaid programs and through litigation in both federal court (seeking declaratory relief prospectively) and state court (seeking payment of claims retrospectively).

In August 1997, Congress passed the Balanced Budget Act of 1997 (“BBA”), which authorized Medicaid’s underpayment of Medicare copayments for future medical services and which also attempted to moot any pending lawsuits filed to collect past-due reimbursement.  The Litigation Center challenged Congress’ retroactive application of the BBA provisions in court cases then pending in Montana and the District of Columbia. The Litigation Center also served as amicus curiae in related cases in Tennessee and Wisconsin.

The Seventh Circuit, the Ninth Circuit, and the U.S. District Court for the District of Columbia all held against the physician plaintiffs. The Litigation Center supported a petition for certiorari by the California Medical Association and filed its own amicus curiae brief.  The Supreme Court denied the CMA petition as well as similar petitions by other parties in these lawsuits.  In a final effort to preserve physician rights, the Litigation Center supported an appeal by the Medical Society of the District of Columbia to the D.C. Court of Appeals.  The case was named McCreary v. Offner.  The appellate court held that HHS’s permitting states to limit reimbursement to health care providers was reasonable. 

Interest in this Case: Physicians have provided medical services to poor and elderly patients and patients with disabilities, for which they have not been properly compensated by the Medicaid programs.  The Litigation Center wants to help these physicians recover the money they were promised at the time they rendered their services, according to the law in effect when those services were rendered. 

Result:  Following the above-mentioned rulings in other jurisdictions, the D.C. Court of Appeals also ruled against the physician plaintiffs.

 

State of Minnesota v. United States, 102 F.Supp.2d 1115 (D. Minn. 2000)

Outcome:    Very unfavorable

Issue

The issue in this case was whether the Medicare+Choice program was constitutional, insofar as it provided capitation payments for physicians that varied from state to state.

AMA interest

The AMA supports fair payments to physicians for their services.

Case summary

The Minnesota Attorney General challenged the constitutionality of the Medicare+Choice program, enacted under the Balanced Budget Act of 1997.  The complaint charged, inter alia, that the statutory payment formula violated the Fifth Amendment’s equal protection requirement because it provided different capitation payments for similar HMO participants in different states and was not rationally related to the purpose of expanding health care delivery options to beneficiaries nationwide.  The Justice Department moved to dismiss the complaint. 

The court granted the motion and dismissed this case.

Litigation Center involvement

The Minnesota Medical Association filed an amicus brief, which the Litigation Center joined.  The brief argued that the motion to dismiss should be denied.

North Carolina Challenge to HCFA Overpayment Recoupment Effort

Outcome:    Very favorable

Also Payment issues (for physicians)

Issue

The issue in this administrative proceeding was whether a Medicare fiscal intermediary could recover alleged overpayments it had made to physicians for prescription medications, when the physicians were without fault and the fiscal intermediary had implemented ambiguous and inconsistent payment policies.

AMA interest

The AMA opposes unfair and untimely efforts by payers to recover money paid to physicians for their services, particularly if the physicians rendered services or incur expenses under the good faith belief that the money they were being paid was the amount they were entitled to receive.

Case summary
The Litigation Center, the North Carolina Medical Society, and the American Urological Association successfully challenged an effort by the Health Care Financing Administration, through its intermediary, CIGNA Insurance Company, to recover Medicare overpayments from approximately 100 North Carolina physicians. The overpayments stemmed from CIGNA’s failure to implement a change in payment methodology for certain drugs. The Medicare hearing officer found the physicians "without fault" and thus not subject to recoupment.

Litigation Center involvement

The Litigation Center contributed toward the physicians’ legal expenses.

Palomar Medical Center v. Sebelius, 693 F.3d 1151 (9th Cir. 2012)

Outcome:     Very unfavorable

Also under Payment Issues for Physicians, Regulatory Burdens

Issue

The issue in this case was whether regulations of the United States Department of Health and Human Services (HHS) that govern reopening decisions under the Medicare Recovery Audit Contractor (RAC) Program were valid.

AMA interest

The AMA opposes RAC Program physician audits.

Case summary

A patient had his hip removed and replaced with a prosthetic device at Palomar Medical Center.  Pursuant to his physician’s direction, the patient was admitted to Palomar’s inpatient rehabilitation unit.  Palomar then submitted a Medicare claim for the rehabilitation services rendered to the patient, which was paid. 

More than a year after the claim had been paid, HHS, pursuant to the Medicare Recovery Audit Contractor (RAC) Program, reopened the claim and determined that Palomar had not been entitled to payment for the patient’s rehabilitation services, as these services could have been rendered at a skilled nursing facility (SNF), instead of the hospital rehabilitation unit.

Palomar appealed the RAC contractor’s actions through several administrative levels.  It contended that, under the Medicare regulations, after one year following payment a claim cannot be reopened except for good cause and good cause did not exist here.  One of the administrative bodies, an administrative law judge (ALJ), agreed with Palomar that the failure to show good cause voided the reopening.  However, a higher administrative review body (the Medicare Appeals Council) found that the ALJ had been unauthorized to question the failure to show good cause.  Therefore, HHS ultimately concluded that the overpayment determination had been correct.  Since Palomar remained a participant in the Medicare program, HHS recouped the money required to restore the alleged overpayment.

Palomar then sued HHS in the United States District Court for the Southern District of California, contending that the reopening had been procedurally defective because good cause had not been shown for reopening the claim.  Palomar also contended that HHS had deprived it of due process by failing to provide a forum in which it could contest the legality of the reopening.  The parties made cross-motions for summary judgment, which were referred to a federal magistrate judge, who recommended an order in favor of HHS.  The trial judge upheld the magistrate’s recommendation in its entirety, and summary judgment was entered in favor of HHS. 

Palomar appealed to the United States Court of Appeals for the Ninth Circuit.  Oral argument was heard on March 7, 2012.

On March 14, 2012, the Ninth Circuit called for additional amicus briefs, which are to address, primarily, the question of whether the federal courts have jurisdiction to enforce the agency’s compliance with the good cause standard for reopening.

On August 22, 2012, the Ninth Circuit found that HHS had interpreted its regulations correctly and affirmed the district court decision in favor of HHS.  Palomar petitioned for rehearing en banc, but that motion was denied on January 29, 2013.

Litigation Center involvement

The Litigation Center, along with the California Medical Association, filed an amicus curiae brief in support of Palomar.

The Litigation Center, along with the nine state medical societies in the Ninth Circuit, filed a second amicus brief, responding to the court’s request.  

The Litigation Center, along with the nine state medical societies in the Ninth Circuit, filed a third amicus brief, to support the petition for rehearing.

United States Court of Appeals for the Ninth Circuit first amicus brief

United States Court of Appeals for the Ninth Circuit second amicus brief 

United States Court of Appeals for the Ninth Circuit third amicus brief

 

Southern Rehabilitation Group v. Sebelius, 732 F.3d 670 (6th Cir. 2013)

Also under Prompt payment laws

Outcome:    Favorable

Issue

The issue in this case was whether the Medicare Program must pay interest for late payment of “clean claims” for medical services.

AMA interest

The AMA believes that all third party payers, including the Medicare Program, should pay promptly for medical services.

Case summary

Southern Rehabilitation Group and its owner, Dr. James P. Little, provided rehabilitation services, with most of their patients covered by Medicare. Plaintiffs billed the services pertinent to this case to a Part B Medicare contractor, Cigna.

The plaintiffs took issue with the way Cigna processed their reimbursement claims, asserting that such claims were improperly downcoded or denied.  Following prosecution of their claims at the administrative level, which took several years, plaintiffs sued the Secretary of Health and Human Services (HHS) and Cigna in the United States District Court for the Eastern District of Tennessee.  The plaintiffs raised several legal theories, both against CMS and against Cigna. As part of their claim for relief, plaintiffs sought interest on their unreimbursed “clean” claims, pursuant to 42 U.S.C. § 1395u(c)(2).

More than a year and a half after the plaintiffs filed their lawsuit, the defendants moved to have certain of the payment claims remanded for further consideration at the administrative level. The trial court granted this motion. On remand, HHS allowed and then paid the principal amounts of the claims -- but not late payment interest.

Following notification that the remanded claims had been paid, the court granted summary judgment in favor of the defendants and against the plaintiffs on all open issues.  As justification for denying interest, the court quoted a passage from the Medicare Claims Manual, which maintained that “interest payments are not payable on clean claims initially processed to denial and on which payment is made subsequent to the initial decision as a result of an appeal request.”  The plaintiffs appealed to the Sixth Circuit.

On October 18, 2013, the Sixth Circuit affirmed the district court on all issues, except on the late payment claim.  That issue was reversed and remanded for further consideration.

Litigation Center involvement

The Litigation Center filed an amicus brief in the sixth Circuit to support the plaintiffs.  The amicus brief argued that the Medicare Claims Manual misstated the law regarding the obligation of the Medicare Program to pay interest on clean claims, and the plaintiffs had a right to recover interest on their clean claims.

United States Court of Appeals for the Sixth Circuit brief