Do You Know the Difference Between a Conditional Payment Letter & Demand?

Lack of Understanding of Medicare Conditional Payment “Letter” v. “Demand” Ends Up Costing Plaintiff Years of Litigation and Lots of Dollars

Rafael Gonzalez, Esq., Partner, Cattie & Gonzalez, PLLC

On August 21, 2020, the United States District Court for the District of Minnesota published its opinion on Estate of William Fisher v. Azar. It found that because the Medicare Appeals Council (MAC) did not comply with federal regulations when it conducted a full de novo review of the Administrative Law Judge’s decision, the Court recommends the matter be remanded to the MAC so that it can consider the procurement cost offset issue, the only issue that Plaintiff raised in its appeal. Furthermore, even if the MAC were to establish that it properly reviewed the full award on appeal, the Court would still recommend the matter be remanded for additional findings, so that the MAC could consider whether it is appropriate to supplement the record with additional information.

Facts

This action results from a medical malpractice lawsuit that was filed in Minnesota state court. In other words, this is not a no-fault or work comp claim, in which ongoing responsibility for medical care was accepted. This is a liability case. The lawsuit alleged that the Mayo Clinic negligently administered ibuprofen to William Fisher (Decedent), who suffered renal failure and required hospitalization and dialysis treatment before ultimately passing away. An estate was created and the Estate of William Fisher (Plaintiff) sued the Mayo Clinic for damages. Ultimately, Plaintiff made an initial settlement demand that included a claim for costs of Decedent's hospitalization and dialysis.

After Plaintiff filed suit, the Medicare Secondary Payer Recovery Center (MSPRC) sent a notice of conditional payment in the amount of $277,206.58, which included payments made for Decedent's hospitalization and renal failure. In response, Plaintiff informed the MSPRC that expert testimony had established the administration of ibuprofen did not cause Decedent's renal failure. Plaintiff therefore asked the MSPRC to remove charges for Decedent's hospitalization and dialysis treatment because they were unrelated to any negligent conduct. 

In response, the MSPRC issued a second conditional payment notice, which largely excluded those charges and identified $12,657.92 in payments that Medicare made on behalf of Decedent through that date. It is important to note that this latest notice did not indicate procurement costs had been considered or removed. Thereafter, Plaintiff lowered its settlement demand and the case ultimately settled based on Plaintiff counsel’s inaccurate supposition that Medicare was only entitled to $12,657.92. 

Post Settlement Issues

Plaintiff notified Medicare of the settlement. Medicare, however, issued a final demand letter calculating that it paid $65,363.83 for Decedent's medical care. Based on reductions for procurement costs, Medicare also informed Plaintiff that it required repayment of $35,356.60, or more than $20,000 from the previous amount of $12,657.92 upon which Plaintiff relied on to settle the case. 

Plaintiff pursued post-demand administrative appeals with Medicare. Plaintiff filed for redetermination. Medicare reaffirmed its demand. Plaintiff then requested reconsideration, arguing that the appropriate conditional payment amount was no greater than $12,657.92. A Qualified Independent Contractor reviewed the request for reconsideration and upheld the demand. 

Administrative Law Judge’s Decision and Request for Clarification

Plaintiff then appealed the decision to an administrative law judge. (ALJ). The ALJ agreed with plaintiff and concluded the amount due was $12,657.92. Not knowing whether this amount included procurement costs, Plaintiff then submitted a form entitled "Request for Review of Administrative Law Judge (ALJ) Medicare Decision/Dismissal." 

Attached to that form was a letter, in which Plaintiff's counsel indicated it sought clarification as to whether the ALJ's award of $12,657.92 was subject to reduction for procurement costs. Therefore, it was clear that counsel was only requesting reclassification of that amount. 

The Medicare Appeals Council (MAC) deemed Plaintiff's request to be an appeal of the entire ALJ's decision. After reviewing the evidence, the MAC reversed the ALJ and determined that the amount due to Medicare was $35,356.60. Plaintiff here appeals that decision. 

The Court Remands Case Back to Medicare Appeals Council

The Court here determined that remanding the case back to the MAC is appropriate. Federal guidelines require the party seeking MAC review to identify only "the parts of the ALJ's action with which the party requesting review disagrees.” Federal guidelines further provide that the MAC "will limit its review of an ALJ's actions to those exceptions raised by the party in the request for review, unless the appellant is an unrepresented beneficiary." § 405.1112 (b) and (c).

Here, Plaintiff was represented by counsel, and sought review only of the ALJ's decision not to deduct procurement costs from the award of $12,657.92. But rather than decide this narrow issue, the MAC conducted a full review of the record, including the total amount owned to Medicare. It then increased that award by more than $20,000. In doing so, the MAC acted contrary to its own regulations. The Court therefore recommended the matter be remanded to the MAC to consider only the issues that Plaintiff raised in its appeal.

Conclusion

Because the MAC did not comply with federal regulations when it conducted a full de novo review of the award, the Court recommended the matter be remanded to the MAC so that it can consider the procurement issue, the only issue that Plaintiff raised in its appeal. However, the Court also indicates that if the MAC were to establish that it properly reviewed the full award on appeal, the Court would still recommend the matter be remanded for additional findings, so that the MAC could consider whether it was appropriate to supplement the record with additional information. 

My guess is that on remand, the MAC will explain that the $12,657.92 was an interim conditional payment amount; it was not a final demand, as a final demand can only be provided once a settlement has been reached on the case. The $12,657.92 was pre-settlement and informational only; it does not bind Medicare to that figure. The $35,356.60 communicated to the Plaintiff post-settlement was in fact Medicare’s final demand, after it had an opportunity to review all of the evidence and all of the payments made, considering the facts and settlement of the case.

The facts here, and ultimately the case in general, serves as a good reminder for both plaintiffs and defendants, as well as their counsel, that in liability cases, Medicare does not provide a final demand for reimbursement until settlement has been reached. In other words, Medicare is entitled to reimbursement for all payments it makes related to the claim from date of accident or incident to date of settlement, as reported to Medicare by the payer, the Responsible Reporting Entity, through Medicare’s mandatory insurer reporting process. This is why the original $12,657.92 notice did not contain any information on the reduction for procurement costs and why the $35,356.60 demand did. The former was an interim conditional payment advisory in nature and the ladder was a formal final demand for payment with a reduction for procurement costs (attorney’s fees and costs).

About Cattie & Gonzalez, PLLC

The only national law firm focusing its entire law practice on Medicare and Medicaid secondary payer issues, Cattie & Gonzalez, PPLC provides its clients the highest quality MSP compliance advice in a law firm environment, establishing an attorney/client relationship. The Firm stands behind its work and advice, meaning the Firm will defend its opinions, advice, and work product, including any post settlement conditional payments arising from the client’s application of and reliance on the Firm’s Medicare Set-Aside (MSA) Legal Opinion. To reach the firm, you may email us at [email protected] or [email protected], call us at (844) 546-3500, or visit us at www.cattielaw.com.

About Rafael Gonzalez, Esq.

Rafael is a partner in Cattie & Gonzalez, PLLC, the first national law firm focusing its entire law practice on Medicare and Medicaid compliance issues in the liability, no-fault, and work comp industries. He is an attorney with extensive expertise in auto, medical malpractice, products liability, nursing home, med-pay, and workers compensation claims, as well as social security, medicare, medicaid, and affordable care compliance. He is active on LinkedIn, Twitter, Facebook, Instagram, and YouTube.