Plaintiff Loses Medicare Secondary Payer Private Cause of Action Against Hospital
Roy Franco
March 29, 2018

A new decision was handed down from the U.S. Court of Appeals for the 11th Circuit in the Barbara J. Harvey v. Florida Health Sciences Center, Inc. this month.  Here, the Plaintiff pursued a medical malpractice claim against a hospital for her husband’s death.  The hospital agreed to binding arbitration on the sole issue of damages to avoid a lawsuit.

The plaintiff savored her tactical win and then decided to add to her claim the Medicare Secondary Payer (MSP) private cause of action against the hospital.  She now believed she was entitled to double damages because the hospital was a primary payer that “failed” to reimburse Medicare, once it agreed to move forward on the issue of damages only.  The arbitration panel that had jurisdiction over the hearing denied the private cause of action claim,and rather than reserving her right to pursue the issue later, she took another tactic, that we believe inevitably caused her to lose that right altogether.  What she did was instruct her attorney to write the U.S. Government advising her MSP claim was denied, and demanding that it now pursue hospital directly for any medical expense under that law.  She then had her attorney advise the arbitration panel that it would not pursue or present any evidence on medical expense.

Plaintiff was awarded $700,050.73, but the decision was clear that none of it was for past and/or future medical, but only applied to damages funeral expense, Lost Accumulations, Non-economic damages and Loss of household damages.  To satisfy the award, hospital issued three checks made payable as follows: 1) $619,115.82 to Plaintiff and Medicare representing the outstanding Medicare conditional payment obligation; 2) $80,934.91 to Plaintiff and 3) $105,008.00 to Plaintiff attorney for his fees.  Instead of objecting to the draft that was issued payable to plaintiff and Medicare, she accepted it, endorsed it and then sent it to Medicare.  Medicare applied the check to the outstanding conditional payment obligation, but refunded her $401,222.33, for her procurement costs.

Ultimately, the Court ruled against her various claims, because she decided to forego her claim for medical expenses at arbitration.  Most interesting was the Court’s discussion about the MSP private cause of action statutory language.  To trigger the right to bring such a private cause of action claim, a primary plan had to either “fail to provide for primary payment” or “appropriate reimbursement”.   Thus, failure to pay is not actionable, if there is no opportunity for the primary plan to consider the claim first.

Franco Signor Commentary:  This decision could be very helpful in defending claims brought by entities demanding immediate reimbursement for Medicare Advantage Plans/Part D Plans absent any steps to present a claim.  Payments by Medicare Advantage Plans/Part D Plans are not automatically subject to be reimbursed without the opportunity to review, and it is important to make certain such expenses are related.  Traditional Medicare, through its recovery contractors (BCRC and CRC), have processes in place to share this information and allow for dispute and appeal for unrelated charges.  Medicare Advantage Plans and Part D Plans must do the same.  Leveraging this language as a defense is critical in such cases.

Of course, none of this would have occurred, had Plaintiff in this case returned the check to the hospital.  There was no agreement as part of the arbitration to do this, especially an arbitration where the medical expenses were withdrawn.  However, she did, and based on the case, it does appear that the MSP private cause of action was being used to entrap the hospital into double damages.  If that was the intent, that’s just wrong and the right decision was reached here.