LIENS
Welcome to Synergy’s blog page dedicated to the topic of lien resolution. Our team of subrogation experts share their InSights and knowledge on the latest developments and best practices in lien resolution. Stay up-to-date with the latest trends and strategies to ensure that you have the information you need to navigate the complexities of lien resolution.
October 20, 2020
Heidi Ahlborn was injured in a very serious car accident in January of 1996. At the time, she was a nineteen-year-old college student pursuing a degree in teaching. She suffered a catastrophic brain injury that left her incapable of finishing college and unable to care for or support herself in the future. When the Arkansas Department of Health tried to assert a lien against Ahlborn’s settlement, she sued, and the case went all the way to the Supreme Court, who found in her favor.
For more information, read this excerpt from Synergy’s CEO, Jason D. Lazarus‘ book ‘The Art of Settlement.’
August 13, 2020
By: Teresa Kenyon
Medical liens or reimbursement demands are generally an unwelcomed part of the whole recovery process for personal injury attorneys. It’s the case after the case. The target is always moving and there is a lot of information to process and laws to apply. This is generally not the chore that most personal injury attorneys have a strong desire to conquer. You must meticulously ensure that the liens or claims are addressed before disbursing funds or else you have greater problems well after your case has concluded. Medical liens can even pop up when you least expect it. And they can wreak havoc on a case and ruin the overall client experience after you have masterfully secured a recovery. For a personal injury attorney representing an injured client, these medical liens are no fun.
In reality, health plan subrogation has one goal: to move settlement funds away from the injured party and give those funds to health insurance carriers. When someone is injured and requires medical treatment, a health insurance card is produced to secure payment of those medical services. This insurance card could be from Medicare, Tricare, Medicaid or through a private health insurer like Aetna, Blue Cross Blue Shield, Kaiser, etc. It is important to note that even Medicaid and Medicare, including Advantage, RX and supplement plans, can be handled by private health insurance carriers. It can be mystifying. The medical providers (hospitals, doctors, rehabilitation centers, physical therapists, etc.) have contractual arrangements with the health insurance carriers and payment amounts are predetermined according to those contracts. When someone is injured due to the negligence of another and if other insurance coverage is responsible for compensating the injured party, these insurance carriers and government agencies want their money returned.
Subrogation versus Reimbursement
There are two general legal theories for the attempt to receive money back: subrogation and reimbursement. The terms are sometimes used interchangeably, even in case law. Subrogation has the health carrier “stepping in the shoes” of the injured party and presenting their claim directly against the liable party or their insurance carrier. The more formal definition is the substitution of one person in the place of another with reference to a lawful claim or right. On the other hand, reimbursement is when the health carrier directs their attention to the injured party (the beneficiary of the medical treatment) after the injured party has collected settlement funds from the liable party or responsible insurance carrier.
For example, subrogation involves the injured party’s insurance carrier Aetna (or their recovery vendor) going directly to GEICO (the liable third party insurance carrier) and demanding that GEICO reimburse Aetna for the $20,000 in medical expenses paid to various providers by Aetna after the car accident in which the GEICO insured was found liable / accepted liability. On the other hand, reimbursement is when Aetna goes to the injured party directly and demands repayment for the $20,000 in medical expenses paid for medical treatment from the $100,000 policy limits received from GEICO. These concepts are similar but different. The result is unfortunately the same. The injured party receives less money for their injuries.
The thought is that without subrogation or reimbursement, the injured party is obtaining a double recovery. When performing subrogation functions, these health insurance carriers tell themselves that they are collecting the medical damages paid for that should be paid for by another entity – the responsible insurance carrier. The problem is that most recoveries do not fully compensate or make the injured party whole. This is especially the case with a limited settlement. In those cases, the subrogator does not then adjust their claim when medical damages are only one small fraction of the total damages. As a result, there is a huge inequity with the subrogating carrier taking much more than their fair share of that limited settlement.
The idea of subrogating has been around for years as it relates to property damage. In the health insurance context, subrogating by going directly to a liable insurance carrier is a fairly new idea in practice. It is also not readily accepted by most auto, premise or other types of liability insurance carriers. Many subrogation vendors make a big push for their employees to focus on subrogation and obtain the reimbursement directly from the insurance carrier. They treat it more like a coordination of benefits thereby cutting out the plaintiff attorney representing an injured party and sidestepping any need for reduction due to equitable doctrines. The irony here is that subrogation itself is an equitable doctrine.
As you approach the handling of your client’s medical liens, take note that each type of medical lien needs to be handled in a slightly different way. ERISA requires a different approach and cadence than a Medicare or a Tricare claim. Each are governed by their own set of laws whether it be statutory, contractual or equitable. These laws often change. Sometimes this is for the benefit of the injured party but unfortunately, more often these change benefit the collecting medical benefit program. In our experience, the most harmful action an attorney can take is to begin to negotiate a lien without having a full understanding of the rights of recovery. Given that fact, below is an outline of issues to be concerned about in that regard as it relates to ERISA liens.
ERISA Liens: Funding Matters
For ERISA plans, fully understanding recovery rights means verifying the funding source, knowing which law is applicable, obtaining pertinent governing documents and identifying any and all arguments that can result in reduction of the lien. ERISA reimbursement claims stem from employer-based health plans; however, there are exceptions. Religious employers and government employers do not fall under the ERISA framework and would be subject to state law.
ERISA plans are either fully-insured or self-funded. This is the very first assessment that must be done to validate an ERISA plan’s recovery rights. Both plans may have recovery rights in some states. Only the self-funded plan may have recovery rights in every state. Where these rights are derived varies based on this funding status. In some situations, a plan may be governed by the contract language, but that policy may be overridden by state law in some states. It certainly gets complicated. For a deeper read, review the Preemption Clause (29 U.S.C. § 1144(a) (2012)), Savings Clause (§ 1144(b)(2)(A)) and Deemer Clause (§ 1144(b)(2)(B)).
Plan Document Request
The first step to determine funding status and recovery rights is a document request pursuant to the ERISA statute. There is the laundry list of items that the plan participant is entitled to receive under the ERISA statute 29 USC § 1024(b)(4):
The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary, plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.
An administrator is required to provide the requested documents. The ERISA statute has created a civil penalty under 29 U.S.C. § 1132(c)(1) which has been increased to $110/day under 29 CFR § 2575.502(c)–(3).
Subrogation vendors and defense firms that represent self-funded plans will often state that they do not have the documents in-house, therefore they are not the proper party for requesting the documents. They add that the documents are not necessary to ascertain the funding status or recovery rights of the plan and therefore unnecessary. Essentially, they shake off any penalty for their client’s failure to comply. Some of these vendors refer you directly to the plan administrator to obtain the documents. Other vendors readily express their aversion if you send the request to the proper party which is the employer/plan sponsor. It is tricky to know which approach should be used with which vendor.
The Documents
Aside from the ERISA statute, case law has developed about the various documents and how they relate to the right of recovery. The Master Plan Document (MPD) is the controlling document and many times the plan’s-favorable terms are contained in the more readily available Summary Plan Description (SPD) but not present in the MPD. This is a big deal—attorneys should use this to their advantage.
Recovery vendors will often cite the US Airways, Inc v McCutchen case as the reason why they are entitled to 100% recovery. The irony here is that McCutchen actually required a reduction for attorney fees because the policy language did not clearly state that it would not bear any attorney fee or litigation cost incurred to obtain the recovery. The U.S. Supreme Court found that in the absence of clear language in the policy, equitable principles fill the gaps. Those equitable principles most commonly include the Common Fund and Made Whole rules.
McCutchen was remanded and new issues arose as in the interim, the U.S. Supreme Court decided Cigna Corp v Amara, 563 US 421 (2011). It was found to be inappropriate to use the SPD to explain the terms of the plan and instead pointed to ERISA 102(a) which obliges plan administrators to furnish SPDs, but indicated that it does not suggest that information about the plan provided by those disclosures (the SPD) is itself part of the plan.
On remand, it was discovered that SPD had recovery provisions which supported the plan’s claim of an equitable lien under ERISA but the MPD did not. There were several deficiencies. The MPD did not mention reimbursement and instead only allowed subrogation. It also did not reference first-party insurance recoveries and instead specified only third-party recoveries. Because the MPD did not support it, US Airways’ claim was only applicable as to his third-party recovery of $10,000.00 and not his larger first party recovery. That claim was then subject to the Common Fund doctrine. This part of the story is not usually mentioned by the subrogator and sometimes seemingly not even known by the analyst/examiners citing the case.
The lesson is to dig into those plan documents. Not just the SPD. The first response of 99% of self-funded plans is to say they are entitled to 100% simply because they are ERISA self-funded. Synergy is your partner to find the cracks in the policy and create leverage based on the deficiencies found therein.
Early Prep
Although a lien may be the last thing on your mind when you are settling the underlying case, there are some steps you can take during your handling of the case that can solidify certain sticking points to enable more effective, leveraged lien negotiation later.
As you have no doubt have experienced, there are cases where you cannot obtain the full amount of damages. What that also means is that you did not collect the full amount of any alleged medical damages. This could be because of a pre-existing condition that were exacerbated by the loss or it could be because liability was not accepted 100%. If there is a range of accepted treatment but the carrier refused to agree that, for example, a neck surgery 2 years later was causally related to the loss, have that documented by the defense or insurance carrier like in an email thread etc. Unfortunately, a defense medical exam usually does not carry much weight for a lien holder. They will say that it only proves the defense was doing their job, denying relatedness as a means of decreasing the overall settlement they would have to pay out. On the other hand, the actual communications leading to the eventual deceased settlement could show the disconnect and help you secure a well-deserved reduction.
The Claim/Lien Statement
Review the lienholder claim summary closely. Lien statements come in all sizes and with varying pieces of information. You should at a minimum require that the lienholder provide the treatment dates, billing codes (ICD and CPT), provider names, billed amount and paid amount to determine the validity and relatedness of their included claims.
Lienholders do not always accurately present their claims. Be careful of bundled charges or claim lines that show a lump sum with a large payment. Get the breakdown showing individual claim payments, procedure codes, etc., to ensure all are related. Claims can be backed out or adjusted and a lien holder may still show them on their lien statement. The claim summaries need to be carefully reviewed to ensure that duplicate claims or unrelated claims are not included. This is especially important for medical malpractice cases and pre-existing injuries.
Conclusion
The predominant piece of advice is to not negotiate until you have analyzed all the above pieces of the puzzle and how they fit together. Negotiating before assessing everything will place you at a huge disadvantage and then when you turn the lien over to Synergy, we are much more limited in our ability to obtain the biggest reduction.
Synergy Settlement Services is your ERISA lien expert. The ERISA team has over 100 years of combined experience and many have come from the other side. We will tirelessly work to reduce the lien claim, bring the matter to a close and eliminate any risk and additional expense for you or your client. Luckily, Synergy’s day in and day out handling of liens with the same vendors repeatedly gives us insider knowledge to get the best result.
March 2, 2020
The 11th Circuit Court of Appeals weighed in on the question of whether the Medicare statute, which provides a three-year timeline to the government to request repayment, applies to a private entity providing Medicare benefits (Medicare Advantage plans). The Court’s answer is that the claims filing provision does not bar a claim and that the timeline is not a precondition to filing suit.
Basic primer on Medicare. When Medicare pays for accident-related treatment, it is entitled to be paid by the primary payor. Its payment is made as a conditional payment, conditioned on repayment when other funds become available. In the case of an accident, that could be medical payments coverage, bodily injury coverage or an uninsured/underinsured coverage. If Medicare seeks reimbursement and is denied, the United States can sue the primary plan to recover its payment. If the cause of action is successful, Medicare can be awarded double damages.
Section 1395y(b)(2)(B)(iii) contains a three-year statute of limitations that requires the government to sue within three years of the date that Medicare receives notice of a primary payer’s responsibility to pay.
(iii) Action by United States
… An action may not be brought by the United States under this clause with respect to payment owed unless the complaint is filed not later than 3 years after the date of the receipt of notice of a settlement, judgment, award, or other payment made pursuant to paragraph (8) relating to such payment owed.
(vi) Claims-filing period
Notwithstanding any other time limits that may exist for filing a claim under an employer group health plan, the United States may seek to recover conditional payments in accordance with this subparagraph where the request for payment is submitted to the entity required or responsible under this subsection to pay with respect to the item or service (or any portion thereof) under a primary plan within the 3-year period beginning on the date on which the item or service was furnished.
A few sections down lies § 1395y(b)(3)(A), which provides a private cause of action available to Medicare beneficiaries and other private entities if a primary plan fails to provide primary payment or reimbursement. This section does not contain a statute of limitations.
(A) Private cause of action
There is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).
This is where the Medicare Advantage plan enters. In 1997, Congress enacted Medicare Part C or “Medicare Advantage” program (also known as MAP, Med A, MA, MAO). These plans are administered by private insurance companies that provide Medicare benefits for fixed fees from the Center for Medicare and Medicaid Services. 42 U.S.C. § 1395w-22(a)(4) states that a Medicare Advantage plan may charge a primary plan when a payment “is made secondary pursuant to section 1395y(b)(2).” This established that Medicare Advantage plans can sue under the MSPA to recover from primary plans if they do not pay. These plans must use the MSPA’s private cause of action versus the government cause of action.
In the MSPA Claims v. Kingsway Amigo, 2020 U.S. App. LEXIS 4554 (February 13, 2020), the Court found that there is nothing within the statutory language or structure to suggest the Medicare Advantage plan must comply with the claims filing provision as a prerequisite to seeking reimbursement. The decision starts with a warning as the second sentence of the opinion acknowledges that the case “turns on a careful examination of the often-convoluted rules governing the federal Medicare program.” The court painstakingly reviews the statutory structure of the Medicare statute even with a little levity; the opinion states “Okay, time for a deep breath and a summary.”
The Court found that the dependent “notwithstanding” clause and the permissive term “may” in the actual text of the MSP claims filing provision means that Medicare Advantage plans are not required to bring suit as a prerequisite in the 3-year period. Specifically stating, “[w]ords in a statute must be interpreted according to their ordinary meaning and “may” cannot, by any rendering, mean “must.” The Court finds that when a statute uses the word “may,” it “implies that what follows is a permissive rule and that it does not create a separate bar that private Medicare Advantage plans must overcome in order to sue.
The importance of this decision can’t be overstated. With no statute of limitations, the private cause of action provisions that MAO’s have been using so aggressively to recover are even more powerful. Insurers are becoming increasingly more fearful of failure to repay MAOs and this can lead to delays in resolution of a settlement when there are potential Medicare conditional payment or advantage plan liens. In addition, personal injury lawyers can be the targets of these types of private causes of action as well which in turn gives trial lawyers another thing to worry about when it comes to lien resolution. Because of these sorts of issues, now more than ever, insurers may want to directly pay MAO liens back directly and demand indemnification.
To avoid these types of scenarios and alleviate concerns, work with Synergy as your partner in bringing to resolution all liens asserted by Medicare Advantage plans, Medicare supplement plans and traditional Medicare outside of litigation. We also offer lien reduction services for many other lien types including ERISA, FEHBA, Military, Disability and Medicaid.
February 13, 2020
By: Michael Walrath
Some of the most frustrating and murky issues facing attorneys representing injured clients stem from alleged direct provider “liens” against settlement proceeds. The positions of various state bar associations on these issues, and the limited law delineating them, have historically been ever-shifting and evolving.
- Ethical Obligation to Protect Liens
One constant in this otherwise uncertain area, is this: Attorneys representing injured Plaintiffs in personal injury actions have an ethical responsibility to use all reasonable efforts to resolve disputes between clients and known third-party lienholders.
Pursuant to the rules of most state bar associations and the ethics opinions interpreting them, injury attorneys cannot unilaterally arbitrate lien disputes. If a dispute cannot be resolved through negotiation, then injury attorneys should consider the possibility of depositing the disputed funds into the registry of the applicable court and proceed to adjudicate the dispute. Ethics committees in many states have stated that injury attorneys should endeavor to assist clients and third-party lienholders in effecting a compromise and resolving lien disputes, if possible. If such efforts fail, lawyers are often encouraged to institute interpleader actions in a court of competent jurisdiction naming their client and the physician as co-defendants. For obvious reasons, this should be a last resort and is not the only option in so far as adjudication goes, even at impasse. Other options include suits against providers for overcharging, unfair or deceptive billing practices, unfair debt collection practices, declaratory relief, or similar.
- Unreasonable Hospital Charges
While not necessarily in the lien context, the overarching issue of unreasonable medical charges, especially hospital charges, have become increasingly prevalent in national and local news. Headlines like the following are appearing across the country, almost daily:
- ‘I wasn’t doing anything crazy’ | Florida man faces $100K hospital bill after e-scooter crash (ABC News, July 19, 2019)
- When a hospital sling costs 900% more than Amazon’s price, something is very wrong (Los Angeles Times, Sep 13, 2019)
- ‘Really astonishing’: Average cost of hospital ER visit surges 176% in a decade, report says (USA TODAY, Jun 4, 2019)
Hospital charges, untethered to their internal costs or the average amounts they negotiate, receive and accept as payment in full, have skyrocketed. Thankfully, only a small percentage of the patient population is even asked to pay full billed charges, and an even smaller fraction pays them. But unfortunately, plaintiffs injured in third-party liability scenarios are among those unlucky patients.
Thankfully, the law in most states allows patients to challenge unreasonable hospital charges. The touchstone of such a challenge usually centers on the reality that the parties to the agreement to pay for the services, i.e., the hospital and the patient, do not agree on a price term. The “open price term” doctrine ensures that while a contract can be concluded and binding without agreement to price, a “reasonable” price is imported into that “open price term” contract. A quote from the seminal case in Florida sums up this concept as follows:
A patient may not be bound by unreasonable charges in an agreement to pay charges in accordance with “standard and current rates.” When a contract fails to fix a price furthermore, a reasonable price is implied. Humana thus is limited to reasonable compensation.
Payne v. Humana Hospital Orange Park, 661 So.2d 1239 (Fla. 1st DCA 1995). With the reasonableness challenge on solid legal footing, the common law in most states goes on to illuminate the types of evidence relevant to reasonable value. There are essentially types of evidence which show up in state case law across the country, as follows: 1) the average charges in the community for identical care (often referred to as “usual and customary rates” or UCR), 2) the average amounts providers accept as payment in full across the entire spectrum of payers, including managed care, often referred to as “average reimbursement rates,” and 3) the “cost of care” which includes evidence of the provider’s internal cost structure. A federal case which set these factors out clearly has been effectively adopted in several states, in whole or in part, describes these elements as follows:
Plaintiff’s claim of unreasonable pricing for hospital services could be proved based on the following non-exhaustive types of evidence: (1) the relevant market price for hospital services (including the rates charged by other similarly situated hospitals for similar services); (2) the usual and customary rate Mercy charges and receives for the services in question; and (3) Mercy’s internal cost structure.
Colomar v. Mercy Hospital, Inc., 2007 U.S. Dist. LEXIS 52659 (S.D. Fla. 2007). Texas is one such state, and its Supreme Court held as follows when addressing discovery issues in a case wherein a plaintiff challenged the reasonableness of hospital charges asserted under Texas’ hospital lien statute:
In any event, for discovery purposes a hospital’s costs surely have some bearing on the reasonableness of its patient charges. See Colomar, 461 F. Supp. 2d at 1272 (noting that a hospital’s internal cost structure could play a role in evaluating a claim of unreasonable pricing). Accordingly, we hold that the trial court did not order the production of irrelevant information.
In re N. Cypress Med. Ctr. Operating Co., No. 16-0851, 2018 Tex. LEXIS 1148, at *18 (Apr. 27, 2018). While not an exclusive list of evidence relevant to reasonable value, the above factors lend a good starting point, in most states.
- Hospital Liens
Hospital liens are the mechanism which “attach” a hospital “debt” to a personal injury settlement. These liens attach only to settlement proceeds, they do not attach to any other personal or real property of the patient/plaintiff. The easy way to understand and remember the difference between “liens” and “debts” is that DEBTS ATTACH TO PEOPLE, while LIENS ATTACH TO PROCEEDS. Hospital liens have been the subject of much litigation, nationally. Forty states and the District of Columbia[1] have enacted state statutes creating hospital liens. In contrast, Florida instead offers lien rights on a county by county basis. I strongly recommend a LEXIS or West Law search of your state statute and review of the cases cited below. Treatment, rights, and obligations, penalties for impairment, and general interpretation of everything from equity to timely filing, vary widely by state.
- Case Study
As part of every presentation to injury firms across the country, I always start by asking about the status quo. Firstly, what size discounts do you typically see on cases with full settlements (what is the “worst” discount you would agree to and what is a good day) when negotiating a hospital lien? The numbers I am told are surprisingly consistent. Typically, I am told they would never settle for less than a 20% discount, and a 40% discount is a “home run” (on a fully-funded case; i.e., equitable reductions vary based upon settlement size).
Accordingly, the following chart displays an actual Synergy case, which was analyzed for “reasonable value” and ultimately resolved at a discount. Compare the values for the “worst” average discount (20% off), the “home run” discount (40% off) and the results of instead reducing to various percentages above “reasonable value.”
“Status Quo” negotiated discounts from Full Billed Charges ($95,457.12)
| 20% Discount | 30% Discount | 40% Discount |
| $76,365.70 | $66,819.98 | $57,274.27 |
| (a 641% profit to the hospital) | (a 418% profit to the hospital) | (a 344% profit to the hospital) |
Enhanced “Cost Up” Negotiations, from the Reasonable Value of Care ($20,000)
| 125% Reasonable Value | 150% Reasonable Value | 100% Reasonable Value |
| $25,000 | $30,000 | $40,000 |
| (a 74% discount from FBC) | (a 69% discount from FBC) | (a 58% discount from FBC) |
As illustrated above, negotiating up from the “Reasonable Value” (cost of care plus a reasonable profit), often results in much deeper discounts, while negotiating down from the Full Billed Charges often results in significant overpayments to the hospital.
Synergy offers two products to assist with hospital and other direct provider liens, as follows:
- Reasonableness Reports. Synergy analyzes your provider bills/liens, eliminates all non-billable charges and reprices billable charges to a reasonable profit above cost. The fee for Reports is 15% of the additional savings you obtain in your negotiations, using the Report.
- Full Negotiation Services. Using the same data, analysis and methodologies, coupled with Synergy’s hundreds of years of combined experience negotiating the release of health liens, Synergy will negotiate for you and charges 15% of the additional savings we obtain.
As you know, 100% of all post-settlement time and resources spent resolving liens are “sunk costs” on your files. Synergy’s efforts often result in deeper discounts than are typically obtained negotiating in-house. Accordingly, the “path of least resistance” also happens to the road to the deepest discount. Please consider Synergy on your next hospital/provider lien issue and see why thousands of attorneys across the country rely on Synergy to save their clients money, while also saving their staff time.
Please do not hesitate to contact us with any questions and thank you for your support.
[1] See Ala. Code § 35-11-370; Alaska Stat. § 34.35.450; Ariz. Rev. Stat. Ann. § 33-931; Ark. Code Ann. § 18-46-101; Cal. Civ. Code § 3045.1; Colo. Rev. Stat. Ann. § 38-27-101; Conn. Gen. Stat. Ann. § 49-73; Del. Code Ann. tit. 25, § 4301; D.C. Code § 40-201; Ga. Code Ann. § 44-14-470; Haw. Rev. Stat. § 507-4; Idaho Code Ann. § 45-701; 770 Ill. Comp. Stat. Ann. 23/1; Ind. Code Ann. § 32-33-4-1; Iowa Code Ann. § 582; Kan. Stat. Ann. § 65-406; La. Rev. Stat. Ann. § 9:4751; Me. Rev. Stat. tit. 10, § 3411; Md. Code Ann., Com. Law § 16-601; Mass. Gen. Laws Ann. Ch. 111, § 70a; Minn. Stat. § 514.68; Mo. Ann. Stat. § 430.230; Neb. Rev. Stat. Ann. §§52-401 & 52-402; Nev. Rev. Stat. Ann. § 108.590; N.H. Rev. Stat. Ann. § 448-A:1; N.J. Stat. Ann § 2a:44-35; N.M. Stat. Ann. § 48-8-1; N.Y. Lien Law § 189; N.C. Gen. Stat. Ann. § 44-49; N.D. Cent. Code Ann. § 35-18-01; Okla. Stat. Ann. tit. 42 §§43 & 44; Or. Rev. Stat. Ann. § 87.555; R.I. Gen. Laws Ann.§§9-3-4 to 9-3-8; S.D. Codified Laws § 44-12-1; Tenn. Code Ann. § 29-22-101; Tex. Prop. Code Ann. § 55.001; Utah Code Ann. § 38-7-1; Vt. Stat. Ann. tit. 18, § 2253; Va. Code Ann. § 8.01-66.2; Wash. Rev. Code Ann. § 60.44.010; Wis. Stat. Ann. § 779.80
January 17, 2020
By Jason D. Lazarus, J.D., LL.M., MSCC, CSSC
Failure to Pay Equals Personal Liability
The government takes its reimbursement rights seriously and is willing to pursue trial lawyers who ignore Medicare’s interest. On March 18, 2019, the United States Attorney for the District of Maryland announced that a Maryland personal injury law firm had agreed to pay the United States $250,000 to settle allegations that the firm failed to reimburse Medicare for payments made on behalf of its client. As part of the settlement, the firm “also agreed to (1) designate a person at the firm responsible for paying Medicare secondary payer debts; (2) train the designated employee to ensure that the firm pays these debts on a timely basis; and (3) review any outstanding debts with the designated employee at least every six months to ensure compliance.”
This is the second such settlement in last year. Back In June of 2018, the U.S. Department of Justice announced a settlement with a Philadelphia personal injury law firm involving failure to reimburse Medicare. The firm agreed to start a “compliance program” and the DOJ stated that this “settlement agreement should remind personal injury lawyers and others of their obligation to reimburse Medicare for conditional payments after receiving settlement or judgment proceeds for their clients.”
Consequently in today’s complicated regulatory landscape, a comprehensive plan for Medicare compliance has become vitally important to personal injury practices. Lawyers assisting Medicare beneficiaries are personally exposed to damages and malpractice risks daily when they handle or resolve cases for Medicare beneficiaries. A prime example of the risk and personal liability is U.S. v. Harris, a November 2008 opinion.[1] In Harris, a personal injury plaintiff lawyer lost his motion to dismiss against the U.S. Government in a suit involving the failure to satisfy a Medicare subrogation claim. The plaintiff, the United States of America, filed for declaratory judgment and money damages against the personal injury attorney owed to the Centers for Medicare and Medicaid Services by virtue of third party payments made to a Medicare beneficiary.[2] The personal injury attorney had settled a claim for a Medicare beneficiary (James Ritchea) for $25,000.[3] Medicare had made conditional payments in the amount of $22,549.67. After settlement, plaintiff counsel sent Medicare the details of the settlement and Medicare calculated they were owed approximately $10,253.59 out of the $25,000 settlement.[4] Plaintiff counsel failed to pay this amount and the Government filed suit.
A motion to dismiss filed by plaintiff counsel was denied by the United States District Court for the Northern District of West Virginia despite plaintiff counsel’s arguments that he had no personal liability. Plaintiff counsel argued that he could not be held liable individually under 42 U.S.C. 1395y(b)(2) because he forwarded the details of the settlement to the government and thus the settlement funds were distributed to his clients with the government’s knowledge and consent. The court disagreed. The court pointed out that the government may under 42 U.S.C. 1395y(b)(2)(B)(iii) “recover under this clause from any entity that has received payment from a primary plan or from the proceeds of a primary plan’s payment to any entity.” Further, the court pointed to the federal regulations implementing the MSPS which state that CMS has a right of action to recover its payments from any entity including an attorney.[5] Subsequently, the U.S. Government filed a motion for summary judgment against plaintiff counsel. The United States District Court, in March of 2009, granted the motion for summary judgment against plaintiff counsel and held the Government was entitled to a judgment in the amount of $11,367.78 plus interest.[6]
Resolution of the Government’s interests concerning conditional payment obligations is simple in application but time-consuming. The process of reporting the settlement starts with contacting the Benefits Coordination Recovery Contractor (BCRC).[7] This starts prior to settlement so that you can obtain and review a conditional payment letter (CPL).[8] These letters are preliminary and cannot be relied upon to satisfy Medicare’s interest. However, they are necessary to review and audit for removal of unrelated care. Once settlement is achieved, Medicare must be given the details regarding settlement so that they issue a final demand. Once the final demand is issued, Medicare must be paid its final demand amount regardless of whether an appeal, compromise or waiver is sought.[9] Paying the final demand amount within sixty days of issuance is required or interest begins to accrue at over ten percent and ultimately it is referred to the U.S. Treasury for an enforcement action to recover the unpaid amount if not addressed.[10]
Resolution of Conditional Payments – Appeal, Compromise or Waiver
The repayment formula for Medicare is set by the Code of Federal Regulations. 411.37(c) & (d) prescribe a reduction for procurement costs and that is it.[11] The formula does not take into account liability related issues in the case, caps on damages or policy limits. The end result can be that the entire settlement must be used to reimburse Medicare. The only alternatives are to appeal, which requires you to go through four levels of internal Medicare appeals before you ever get to step foot before a federal judge or compromise/waiver. There is plenty of case law requiring exhaustion of the internal Medicare appeals processes which means that Medicare appeals are lengthy as well as an unattractive resolution method.[12] What makes them even more unattractive is the fact that interest continues to accrue during the appeal so long as the final demand amount remains unpaid.
An alternative resolution method is requesting a compromise or waiver post payment of the final demand. By paying Medicare their final demand and requesting compromise/waiver, the interest meter stops running. If Medicare grants a compromise or waiver, they actually issue a refund back to the Medicare beneficiary. There are three viable ways to request a compromise/waiver. The first is via Section 1870(c) of the Social Security Act which is the financial hardship waiver and is evaluated by the BCRC.[13] The second is via section 1862(b) of the Social Security Act which is the “best interest of the program” waiver and is evaluated by CMS itself.[14] The final is under the Federal Claims Collection Act and the compromise request is evaluated by CMS.[15] If any of these are successfully granted, Medicare will refund the amount that was paid via the final demand or a portion thereof depending on whether it is a full waiver or just a compromise.
[1] U.S. v. Harris, No. 5:08CV102, 2009 WL 891931 (N.D. W.Va. Mar. 26, 2009), aff’d 334 Fed. Appx 569 (4th Cir. 2009).
[2] Id. at *1.
[3] Id.
[4] Id.
[5] See 42 C.F.R. 411.24 (g).
[6] U.S. v. Harris, No. 5:08CV102, 2009 WL 891931 at *5.
[7] See https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Attorney-Services/Attorney-Services.html
[8] See https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Attorney-Services/Conditional-Payment-Information/Conditional-Payment-Information.html
[9] Id.
[10] 42 C.F.R. 411.24(m).
[11] 42 C.F.R. 411.37(c) &(d).
[12] A perfect example of this is Alcorn v. Pepples out of the Western District of Kentucky. In Alcorn, the court held that “Alcorn’s claim with respect to the Secretary arises under the Medicare Act because it rests on the repayment obligations set forth under 42 U.S.C. § 1395y. She therefore must exhaust the administrative remedies established under the Medicare Act before this court may exercise subject matter jurisdiction over her claim.” Alcorn v. Pepples, 2011 U.S. Dist. LEXIS 19627 (W.D. Ky. Feb. 25, 2011).
[13] 42 U.S.C. § 1395gg
[14] 42 U.S.C § 1395y
[15] 31 U.S.C. § 3711
January 17, 2020
In Publix Super Markets, Inc. v. Figareau et. al., Case No. 8:19-cv-545, 2019 WL 6311160 (M.D. Fla. Nov. 25, 2019), the Court permitted an ERISA self-funded health plan’s equitable lien claim to attach to the plaintiff attorney. This case is further evidence that using Synergy Settlement’s Lien Resolution service can be essential to fully resolve asserted liens and ensure that you, your client and your firm are protected.
Publix provides a health benefit plan that is ERISA self-funded (“The Plan”). Figareau and Paul are the parents of a child who sustained a birth injury. The Plan paid $88,846.39 in related medical expenses. The case settled and the “funds are housed in a designated structured settlement account established by [Paul and Figareau].”
Publix initiated an action against Figareau and Paul, as well as their attorney and the attorney’s firm (“Attorney Defendants”) seeking to obtain appropriate equitable relief to enforce the Plan’s reimbursement provisions. Specifically, Publix sought reimbursement of the settlement funds and equitable relief in the form of a constructive trust or equitable lien on the amounts held or controlled by the defendants as a result of the settlement of the underlying case.
Defendants argued numerous points including the fact that the attorney and law firm are not parties to the Plan and therefore the claims against them are not cognizable. The Court found that the claim against the Attorney Defendants are cognizable because they hold the settlement proceeds in trust or otherwise possess the funds. Specifically, a lien or constructive trust on funds in possession of the Attorney Defendants is imposed by the express terms of the Plan. The Court reiterated earlier decisions where it was stated that “the most important consideration is not the identity of the defendant, but rather that the settlement proceeds are still intact, and thus constitute an identifiable res that can be restored to its rightful recipient.”
Another point argued by the defendants is that this action “creates an impermissible conflict of interest between [the Attorney Defendants], the minor child, and Publix,” and that “[i]t would be unethical . . . for [the Attorney Defendants] to represent Publix in a contingency fee contract and protect the interest of Publix over the minor.” The Court found that “the funds held in trust by the Attorney Defendants are, as alleged, subject to a lien by agreement under the Plan. Their possession of the funds does not create a conflict of interest.”
It’s always best for lien resolution to not reach this level. Synergy is your partner to bring these matters to conclusion, limiting your liability and giving you peace of mind.
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