Salveson vs. Sebilius – New MSP Case Decision Regarding Conditional Payments – No Reduction Allowed
Roy Franco
May 25, 2012

Salveson vs. Sebilius 2012 U.S. Dist. LEXIS 66293 (U.S. Dist. Court for the Dist. of South Dakota, Southern Div.)

Facts:  Plaintiff was injured during surgery.  Her bowel was nicked during hernia repair causing fecal material to leak into her abdominal cavity, eventually causing infection and then sepsis.  She resolved her claim for medical malpractice in the amount of $621,000 on February 8, 2008.  Medicare conditionally paid $194,543.63 and under 42 C.F.R. 411.37(a) reduced its amount for attorney fees and procurement costs to $110,864.23. After settlement, plaintiff paid what was owed to Medicare and instituted the administrative process to attempt to recover the funds.  She appeals based on her position that certain charges for medical items and services are not related to her malpractice claim.

The time line regarding plaintiff’s appeal and other pertinent dates are as follows:

  • Initial Appeal request to Medicare Secondary Payer Recovery Contractor – February 5, 2008
  • Case settles for $621,000 – February 8. 2008
  • MSPRC issues Demand Amount for $120,715.88 – July 23, 2008
  • MSPRC adjusts Demand Amount to $110,864.33 – August 2, 2008
  • MSPRC denies initial appeal regarding unrelated charges – August 25, 2008
  • Plaintiff files for reconsideration, elects to not file for hardship – February 20, 2009
  • Motion for reconsideration denied – June 24, 2009
  • Plaintiff appeals before ALJ, telephonic hearing – August 11, 2009
  • ALJ denies plaintiff’s appeal – September 28, 2009
  • Plaintiff appeals to Medicare Appeals Council which denied her claim – March 3, 2010
  • Plaintiff files suit in U.S. District Court.

Jurisdiction is appropriate as plaintiff has exhausted her administrative remedies.  The process to get to U.S. District Court takes over 2 years.

Issue:  Is Medicare required to adjust its demand for conditional payments based on medical items and services which plaintiff asserts are not related to her claim, but for which she included as part of her claim against the settling parties?

Opinion:  No.  The U.S. District Court wasted no time in reaching its decision.  It relied primarily on the decision of the Sixth Circuit in Hadden v. U.S., 661 F.3d 298.  Plaintiff did not provide any proof that the medical items and services being complained of were unrelated to her claim.  Further, her own expert in the underlying case did not agree with her assertion that the medical items and services being complained of were unrelated.  When she settled her claim she agreed to settle all claims which made up her lawsuit.  Like Hadden, the scope of a plan’s responsibility for the beneficiary’s medical expenses -and thus of his own obligation to reimburse Medicare-is ultimately defined by the scope of his own claim against the third party.  This is true even if the beneficiary later compromises as to the amount owed on the claim, even if the third party never admits liability.

Franco Signor LLC Commentary:  Plaintiff cannot have it both ways in a liability settlement that involves reimbursement to Medicare.  If injuries are alleged, claimed or otherwise released, Medicare will seek reimbursement for payments related to such treatment.  Where parties believe that treatment is not appropriate, it is best they cooperate and file a dispute with the MSPRC prior to settlement and have that dispute resolved first.  The Medicare beneficiary going it alone after settlement will have mixed results.  Unless true financial hardship can be demonstrated (a difficult task where the settlement is $621,000), Medicare will not reduce what it is owed.  Careful review of the conditional payment information before settlement, and jointly removing charges that are truly unrelated, provides the best result for all parties involved.

The Release is an important document, even more so after Hadden.  The scope of the claim and what is being released, so long as it is consistent with the parties actions in the investigation and evaluation of the loss are important considerations.