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Medicare Secondary Payer Compliance: Payer FCA Litigation (Part VII)

This is the 7th and final installment in the Medicare Secondary Payer Compliance series. All titles in this series can be viewed below. Subscribe to our blog to receive these future updates. Prior installments of this series can be accessed using the links provided.

Medicare Secondary Payer Compliance: Payer FCA Litigation (Part VII)We can put many of the points discussed in the previous blogs into a practical context by examining two recent cases that highlight some of the struggles faced by payers in administering and processing MSP payments. These cases show that even sophisticated payers from different industries can still overlook this long-existent law, which can result in major costs to those payers. It also goes to show that a well-designed  compliance program can lead to decreased risks and potential regulatory costs.

Kane ex rel. United States v. Healthfirst, Inc. et al.1

In this case, the United States and the State of New York filed complaints-in-intervention  alleging that the defendant, Healthfirst, a private, non-profit insurance program with contracts with New York hospitals, issued electronic remittances to certain providers relating to Medicaid patients.  Though the remittances should have stated that Medicaid could not be billed as a secondary payer for certain covered services, due to an alleged computer software glitch, they failed to include that information; this resulted in improper payment by Medicaid for claims that  triggered MSP and FCA liability.2

The relator alleged that Healthfirst violated the 60 day window mandate by reimbursing Medicaid more than 60 days from the time the relator compiled the list of possible overpayments.  Healthfirst moved to dismiss the complaint, but the district court denied the motion.  It concluded that the 60 day window for reimbursement commenced when the provider was put on notice of a potential overpayment, noting that allowing an individual or entity to commence repayment only after definitively identifying an overpayment would be incompatible with the legislative history and intent of the FCA.  Subsequently, this case settled for $2.95 million.3

Negron ex rel. United States v. Progressive Cas. Ins. Co. et al.4

This FCA case based on an alleged violation of the MSP law has a twist: it involves the intersection of MSP law with New Jersey state automobile insurance law.  In Negron, the relator purchased an auto insurance policy from Progressive, which gave her the choice of selecting a “health first” policy or a “Personal Injury Protection (PIP)” policy as her primary insurer.  Under a health first policy, the enrollee’s private health insurer is the primary payer for medical bills resulting from an automobile accident.  The relator’s primary insurance was Medicare; however, Medicare and Medicaid recipients are not eligible for this type of insurance coverage because Medicare and Medicaid are treated as secondary payers in such situations.5

A few months later, after the relator was involved in a car accident. Medicare conditionally paid for a claim that should have been reimbursed by the auto insurance policy.  The relator brought a FCA action against Progressive and its New Jersey subsidiary, stating that the insurer had failed “to make reasonable and prudent inquiries to ensure compliance with the MSP Act” and that Medicare had improperly paid her bills as the primary payer.[6]  In response, the insurer moved to dismiss the complaint.  In denying the motion to dismiss, the court found that the practice of allowing Medicare and Medicaid beneficiaries to select the “health first” policy was a violation of the MSP, as it allows Progressive to remain willfully ignorant of a beneficiary’s primary plan coverage, and chided the auto insurance company for its lack of controls.  Specifically, the court looked at the underwriting process, which should have involved some investigation into the beneficiary’s eligibility for Medicare and Medicaid.  It also noted that the claims adjustment process should have involved an identical investigation to determine the appropriateness of a “health first” or “PIP” policy for each beneficiary.7

The court stated that Medicare should not pay conditionally for the services rendered to the relator just because the auto insurance company eventually paid Medicare back, and found that this manipulation of the “conditional payment” provision of the MSP ignores the requirement that a conditional payment is only to be made if prompt payment is not made by a primary payer.  Ignoring this requirement allows the defendants to “receiv[e] an interest free loan from the government on claims they are obligated to pay and were always obligated to pay.”8  As a result, the court found that there was a “sufficient allegation [in the complaint] demonstrating economic loss to plead that the claims were false or fraudulent.”  After the U.S. Department of Justice and the State of New Jersey intervened, the defendants settled the case for $2 million.9

Although Negron involves New Jersey state auto insurance laws, the key part of the court’s ruling for health care providers is that the MSP law places the burden of investigating a patient’s health insurance coverage squarely on the shoulders of the provider, and simply  allowing a patient to elect certain coverage without more inquiry may not be a sufficient defense against FCA liability based upon MSP violations payer.

It is likely that we will see more of the MSP-based FCA cases in the coming months and years. Due to the nature of FCA cases, investigations can remain under seal for years at a time before their filing becomes public. As such, the newest trend of enforcement that has been seen may be only the tip of the iceberg of FCA actions brought against payers and providers of all types in the current health care marketplace.

Andrew Kuder, a Law Clerk (not admitted to the practice of law) in the firm’s Newark office, contributed significantly to the preparation of this post.


1. Kane ex rel. United States v. Healthfirst, Inc. et al., 120 F. Supp. 3d 370 (S.D.N.Y. 2015).

2. Id. at 375-77.

3.  Manhattan U.S. Attorney Announces $2.95 Million Settlement With Hospital Group For Improperly Delaying Repayment Of Medicaid Funds, The United States Department of Justice (Aug. 24, 2016), https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-announces-295....

4.  Negron ex rel. United States v. Progressive Cas. Ins. Co. et al, No. 14-577(NLH/KMW), 2016 U.S. Dist. LEXIS 24994 (D.N.J. Mar. 1, 2016).

5.  Id. at *5-*9.

6.  Id. at *27.

7.  Id. at *7.

8.  Id. at *8.

9. Two Insurance Companies Agree To Pay More Than $2 Million To Resolve False Claims Act Allegations, The United States Department of Justice (Nov. 14, 2017), https://www.justice.gov/usao-nj/pr/two-insurance-companies-agree-pay-mor....

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Gary Herschman, Epstein Becker Law Firm, Healthcare Attorney
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GARY W. HERSCHMAN is a Member of the Firm in the Health Care and Life Sciences practice, in the Newark and New York offices of Epstein Becker Green. He also serves on Epstein Becker Green’s National Health Care and Life Sciences Steering Committee, and prior to joining the firm, Mr. Herschman was Co-Chair of the Health Care Practice Group of a large regional law firm. He is also a member of the firm's Board of Directors.

Mr. Herschman represents a diverse group of health care clients, including health systems, hospitals, nursing...

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Melissa Jampol, Epstein Becker Law Firm, Health Care Attorney
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Melissa Jampol is a Member of the Firm in the Health Care and Life Sciences and Litigation practices, in the New York office of Epstein Becker Green. A former federal and state prosecutor, Ms. Jampol represents health care organizations, and their officers and directors, in a variety of enforcement matters at both the state and federal levels.

During her tenure as an Assistant U.S. Attorney in the U.S. Attorney’s Office for the District of New Jersey, Ms. Jampol served in the Health Care and Government Fraud, Violent Crime, and Organized Crime & Gang Units, where she led significant, complex investigations and prosecuted a broad range of high-profile criminal cases, including those involving health care fraud, money laundering, mail and wire fraud, tax fraud, Anti-Kickback Statute violations, child abuse, violations of racketeering (RICO) statutes, and securities fraud. She previously served as an Assistant District Attorney at the New York County (Manhattan) District Attorney's Office, where she investigated and prosecuted sex crimes and violent crimes and led investigative teams on money-laundering and tax-evasion cases.

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Robert E. Wanerman, Epstein Becker Green, Health Lawyer
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ROBERT E. WANERMAN is a Member of the Firm in the Health Care and Life Sciences practice, in the Washington, DC, office of Epstein Becker Green. His practice concentrates on regulatory, reimbursement, and compliance matters affecting health care manufacturers, service providers, and investors in health care organizations. He has extensive experience counseling clients in matters arising under the Medicare and Medicaid programs, administrative law and procedure, the False Claims Act, clinical research rules, grant administration rules, the Anti-Kickback and Stark laws,...

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Tristan Potter-Strait Healthcare Lawyer Epstein
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Tristan A. Potter-​Strait is an Associate in the Health Care and Life Sciences practice, in the Newark office of Epstein Becker Green. She will be focusing her practice on such areas as fraud and abuse, compliance, transactional regulatory health care due diligence, and government investigations. 

Ms. Potter-Strait received her J.D., cum laude and with a concentration in Health Law, from Seton Hall University School of Law, where she also earned a Health Care Compliance Certification, received the school’s Health Law Award.

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