In an important new case—CIGA v. Burwell, 2017 WL 58821 (C.D. California, January 5, 2017)—the court ruled that the CMS practice of seeking full reimbursement of a medical provider’s single charge—even where some unsegregated portion of that charge relates to services not covered by a workers' compensation plan—was improper under the Medicare Secondary Payer Statute (MSP) and its supporting regulations.
This new decision—and its larger claims impact—are broken down as follows:
Over-inclusive CMS demands
The California Insurance Guarantee Association (CIGA) challenged CMS’s conditional payment claim for certain charges unrelated to the underlying workers' compensation claim and for which it was not responsible under California WC law.
Specifically, CIGA’s challenge called into question CMS practices involving situations where a medical provider submits a single charge to Medicare for payment that includes multiple diagnosis codes—some relating to a covered WC service and some that do not. In those instances, CMS seeks reimbursement for the full amount of the charge if there is at least one covered diagnosis code—even if some unsegregated portion of the charge is for services not covered under the WC plan.
CIGA argued that CMS practice was improper and resulted in over-inclusive conditional payment recovery demands. Accordingly, CIGA sought a court ruling against the practice and a permanent injunction barring CMS from reapplying its policy to future conditional payment actions against it.
CMS moved to dismiss on grounds that CIGA’s claim had been rendered moot since Medicare ultimately decided to cease its recovery efforts. Further, CMS argued its interpretation and application of related regulations were entitled to legal deference.
Court rejected CMS arguments
The court ruled for CIGA—rejecting each of CMS’s arguments and finding that its interpretation of the Medicare Secondary Payer statute was contrary to law and not entitled to legal deference.
In reaching its decision, the court focused on how the term “item or service” is defined under the MSP with respect to CMS recovery rights. In relevant part, 42 C.F.R. 1003.101 defines this phrase as “[a]ny item, device, medical supply or service provided to a patient (i) which is listed in an itemized claim for program payment or a request for payment….” The court, contrary to CMS’ position, concluded the phrase does not refer to multiple treatments just because they appear under one charge—noting the singular form of the phrase.
Further, the court stated that whether a WC payer has a “responsibility to make payment” for an “item or service” is a matter of state law. On this point, the court noted California law was clear that where a claimant receives multiple treatments for multiple conditions, the WC payer is not responsible for the treatments unrelated to the industrial accident—at least to the extent such treatments are separable from the related treatments. The court found nothing in the MSP making a payer’s repayment obligation an “all or nothing” proposition—and commented that CMS pointed to no MSP provision requiring CIGA to reimburse CMS for more than what it was otherwise “responsible” for paying.
In addition, the court ruled that CMS was not entitled to legal deference in light of a specific MSP policy manual provision stating:
If WC does not pay all of the charges because only a portion of the services is compensable, i.e., the patient received services for a condition which was not work related concurrently with services which were work related, Medicare benefits may be paid to the extent that the services are not covered by any other source which is primary to Medicare.
CMS argued this provision related only to conditional payments for which CMS can always seek reimbursement, rather than payments for which reimbursement is not expected (or required).
However, the court rejected this argument—interpreting the provision as contemplating the payment of benefits without reimbursement for a condition that is not work-related when furnished concurrently with other services that are work-related.
On this point, the court further commented that its interpretation was buttressed by the deposition testimony of a CMS representative. Specifically, the CMS official testified he found this provision “difficult” because it was either impractical or impossible to split a single charge containing both work-related and nonrelated services. However, he did not necessarily disagree “with the actual substance of that [provision].”
In light of this testimony, the court declared:
[CMS] thus tacitly acknowledged that this provision not only relates to reimbursement but that it requires something other than what CMS actually does with respect to calculating reimbursements for single charges. [CMS] cannot wiggle out of this testimony by submitting a subsequent declaration…stating that this provision simply relates to conditional payments and not reimbursement, which contradicts [the] deposition testimony.
At bottom, it is quite clear that the real reason CMS calculates reimbursement demands in the manner that it does is simply because it is too difficult to do otherwise, not because that is what is required (or even permitted) by any statute, regulation, or policy manual. For these reasons, the Court declines to give…deference to [CMS’s] interpretation of the implementing regulations.
In relation to the ruling, the court emphasized the “limits” of its decision as follows:
The Court simply holds that if a single charge contains multiple diagnosis codes—some of which relate to a medical condition covered by CIGA’s policy and some of which do not—the presence of one covered code does not ipso facto make CIGA responsible for reimbursing the full amount of the charge. Instead, CMS must consider whether the charge can reasonably be apportioned between covered and uncovered codes or treatments. Upon such consideration, CMS might still conclude that apportioning the charge is unreasonable. In addition, even if the charge should be apportioned, the Court takes no position on how CMS should do so (e.g., pro-rata by covered codes versus uncovered codes, or some other method).
New ammunition for challenging certain conditional payment demands
Through this ruling, the court has essentially erected a significant check on CMS practice of seeking full reimbursement for services wholly unrelated to the WC claim or the responsibility of the WC payer. This decision is particularly significant because, over the past year or so, the industry has witnessed CMS increasingly seeking reimbursement for services unrelated to the underlying WC claim. This practice, as noted by CIGA, has led to over-inclusive conditional payment claims.
Going forward, the decision provides WC payers with a new weapon to challenge CMS conditional payment claims. In this regard, the claims payer has the initial burden of making a prima facie case that CMS reimbursement request is over-inclusive. Once met, the burden shifts to CMS to justify the validity of its claim. Based on the court’s ruling in CIGA, claims payers will be better able to challenge CMS reimbursement actions in situations where CMS simply seeks full recovery on a single charge that contains services unrelated to the WC claim. In this sense, the favorable decision comes at a pivotal time because it can be used to push back against CMS’s growing practice of seeking reimbursement on unrelated and other questionable charges.
For more information on this case, and to learn how ISO Claims Partners can help you address conditional payment claims, please contact the author at his contact information below.