Medicare Secondary Payer Act Implicated in False Act Claim against Hospital
Roy Franco
November 27, 2013

When I speak about Medicare Secondary Payer Compliance, I am invariably asked the question about my knowledge of any situations where Medicare has enforced penalties under Section 111 of the Medicare & Medicaid SCHIP Extension Act, or otherwise successfully pursued a lawsuit against insurance companies, including self-insurance, for conditional payment reimbursement.   My answer is always “no”, and typically a collective sigh of relief is heard from the audience as there is the belief there is still time to get their compliance house in order.   Even though I make it clear the Department of Treasury is pursing collections of conditional payments and that Medicare contractors continue to send letters demanding reimbursement for cases that were never reported, there are no specific lawsuits I can point to where Medicare has recovered against a casualty insurance plan or self insurance.   Nonetheless, I came across a recent hospital settlement; underscoring the volatility of ignoring compliance, as whistle blowers under the False Claim Act (FCA) may more than make-up for CMS delay in such enforcement actions.

The False Claims Act (31 U.S.C. §§ 3729 – 3733) imposes liability on individuals and companies who defraud governmental programs.  The law includes a “qui tam” provision empowering people who are not affiliated with the government to file actions on behalf of the government.  Claimants, commonly referred to as “whistle blowers,” can stand to receive up to 25% of the awarded damages, which can be trebled under this law.  Click here for the False Claims Act: A Primer.

Last August, we sponsored a WCI breakout session at the 68th Annual Florida Workers’ Compensation Conference featuring former Assistant U.S. Attorney for the Western District of New York, Robert Trusiak.  Mr. Trusiak was the Affirmative Civil Enforcer (ACE) for the WDNY and responsible for the successful prosecution of hundreds of FCA claims over his 20 year career with the Agency.  His discussion focused on the progression of the FCA claims that started against military vendors and moved on to pharmaceutical suppliers.  He predicted such claims would soon be applied to Parties required to meet MSP compliance.  It appears he was right.

In the recent hospital situation, the U.S. settled with the hospital for $3.675M.  The basis for the settlement was the alleged filing of false health care claims with the United Sates under the Medicare program by failing to report the amounts the defendants received or expected to receive from third-party payers, or wrongfully withheld repayments form the United States after the defendants received payments from third-party payers who were obligated to pay the bill.

This settlement is interesting and follows another similar settlement back in 2007, against a Houston-area hospital system for $15.5M.  The allegations there were similar, implicating FCA liability under the Medicare Secondary Payer Act which requires hospitals to seek payment from insurers who are responsible for the bill rather than automatically turning to Medicare for reimbursement.  Click here to read the full article.  Whether it is Group Health Plans or Non-Group Health Plans with a responsibility to pay ongoing medical, Hospitals appear to be a target of growing qui tam actions that will force them to seek reimbursement from responsible parties first.  In turn, the industry will be forced to step up identification of conditional payments and its prompt reimbursement.

An issue we now must concern ourselves with because of these settlements is whether Non-Group Health Plans are shielded from similar claims by disgruntled employees?  Based on Mr. Trusiak’s presentation, the answer would be “yes” more likely  than not, but time will tell as to whether whistle blowers are preparing claims to assist Medicare with missed recoveries.

The False Claims Act: A Primer

Baptist Health Systems – Settlement Agreement