New Ruling: Court Expands upon Its Recent Ruling Limiting CMS Recovery Rights

By Mark Popolizio May 10, 2017

The court in CIGA v. Price, 2017 WL 1737717 (C.D. California, May 3, 2017) has expanded upon its prior order limiting Medicare’s conditional payment rights. The case has garnered much industry attention, given its potential impact on the Centers for Medicare & Medicaid Services (CMS) recovery claims.

The Case

In this action, CIGA challenged CMS’ billing 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. CIGA argued this practice is improper under the Medicare Secondary Payer Act (MSP) and results in over inclusive conditional payment recovery demands. CIGA sought a court ruling against the practice and a permanent injunction barring CMS from reapplying this policy in the future.

This past January, the court in CIGA v. Burwell, 2017 WL 58821 (C.D. California, January 5, 2017) ruled in CIGA’s favor, finding CMS’ practice improper under the MSP. Click here for an analysis of this prior ruling. In the latest decision, the court addressed what relief, if any, CIGA is entitled to pursuant to its previous order.

The Ruling in Three Parts

In CIGA v. Price, the court expanded upon its prior ruling as follows:

  1. The disputed reimbursement demands are set aside.

 The court vacated and set aside the disputed portions of CMS’ recovery demands. In doing so, the court rejected CMS’ argument this was unnecessary since it had previously withdrawn its demands and had no intention of collecting on them. However, the court felt an order was appropriate, citing evidence in CMS’ prior filings, suggesting it may revive these demands in the future. Further, the court cautioned CMS that it would need “to determine whether some sort of apportionment…is warranted, and if so, by how much” should it seek recovery on these charges in the future.

  1. A prospective declaratory order is granted finding CMS’ billing practice and interpretation of the MSP unlawful.

 The court issued a limited prospective order declaring CMS’ interpretation of the term “item or service” in relation to its billing practice unlawful. The court found this particularly warranted, given CMS has continued to issue recovery demands against CIGA on the same billing practice previously declared improper.

On this point, the court issued the following judicial declaration:

  • One “item or service,” as used in the MSP, does not as a matter of law equate to any medical items, devices, supplies, or services that appear in a single line-item charge on CMS’ payment summary form (PSF). Rather, a statutory “item or service” simply refers to one indivisible medical item, device, medical supply, or service, regardless of how it is billed.
  • Whether a particular line-item charge on a PSF contains more than one indivisible item, device, medical supply, or service is a factual question that must be resolved on a case-by-case basis.
  • If a single line-item charge on a PSF contains multiple diagnosis codes—some of which relate to a medical condition covered by an insurance 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.
  • In the event a single line-item charge on a PSF contains one indivisible item, device, medical supply, or service that is covered by the workers’ compensation policy and one indivisible item, device, medical supply, or service that is not so covered, CIGA does not have a responsibility to make payment for the uncovered item, device, medical supply, or service just because it was billed under the same single line-item charge as the covered item, device, medical supply, or service.

The court refused to award any further declaratory relief, given what it viewed as an “insufficiently developed” record. Further, the court declined to issue retrospective declaratory relief, believing this would be duplicative (since it was setting aside the disputed portions of CMS’ demands).

  1. A permanent injunction barring CMS’ practice is not warranted.

While CMS’ billing practice was ruled unlawful, the court declined to issue a permanent injunction against CMS, on grounds that the stringent legal requirements for imposing this extraordinary remedy had not been met based on the current record.

On this point, CIGA argued absent an injunction that it was subject to irreparable future harm since it would be forced to expend substantial resources challenging a practice that had already been declared unlawful. While acknowledging other courts have concluded that being forced to repeatedly file suit to vindicate the same legal remedy can constitute an irreparable injury, the court believed CIGA overstated the likelihood of irreparable future harm. Specifically, the court noted its intention to issue a declaratory order holding CMS’ practice unlawful, and there was “no evidence that this will not deter CMS from unabashedly repeating the same conduct based on the same erroneous legal argument.” 

 In addition, the court stated it lacked a complete understanding of key aspects of CMS’ recovery process and administration of the MSP. Thus, it was “reluctant to issue an injunction that may substantially disrupt those other aspects of CMS’s operations—even if doing so cures one unlawful aspect of it.” The court further noted CIGA had access to the administrative appeals process to challenge future recovery demands it felt were unlawful.

Remaining Questions Set for Trial in September

The case now heads for a bench trial to address remaining questions regarding declaratory relief and whether a permanent injunction is warranted.

In the interim, the court’s decisions thus far could prove helpful to insurers challenging CMS recovery claims when CMS attempts to obtain full recovery on a single charge that includes items and services for which the payer is not responsible. While these decisions may have limited binding affect outside of California, going forward they certainly provide strong and persuasive authority to challenge this CMS practice in other jurisdictions.

ISO Claims Partners will continue to closely follow CIGA v. Price and provide additional updates as warranted.


Mark Popolizio

Mark Popolizio is the Vice President of MSP Compliance and Policy for ISO Claims Partners. Mark’s area of specialty is Medicare secondary payer compliance. He authors regular articles and provides educational presentations across the country on MSP issues. Mark's e-mail address is mpopolizio@iso.com.