Privateering within the Medicare Secondary Payer Act

Privateering within the Medicare Secondary Payer Act:
MSPA Claims 1, LLC v. Tenet Florida, Inc. and St. Mary’s Medical Center, Inc.
Letters of Marque Rescinded!

On March 18, 2019, the 11th Circuit ruled that a purchaser of receivables from a Medicare Advantage Organization (“MAO,” also known as Medicare Part C) cannot sue a medical services provider for failing to repay the MAO on behalf of a Medicare beneficiary in a timely manner. Although the court missed a point or two as it relates to standing, the court clearly set the limits for MAOs and their assignees’ ability to sue using the Medicare private cause of action. The bottom line: While primary plans can be sued, other entities—such as providers—cannot. This is welcome news for the legal industry as other courts have not always applied such a strict and, in our opinion, correct construction to the Medicare Secondary Payer (“MSP”) laws, including its private cause of action. The ruling also leaves the door wide open for arguments that MAOs cannot use the private cause of action to sue any other entities, such as attorneys, trusts, qualified settlement funds, or even lien resolution administrators.

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We have been closely following the MAO saga in and out of the courts. Over the past seven years, there have been countless state and federal suits designed to test the limits of MAOs’ or their assignees’ rights to step into personal injury settlements—often well after the fact—and seek recovery for medical bills paid under the auspices of the Medicare Secondary Payer Act (“MSP”).[i]  The trend in the federal courts was clearly favoring the MAOs at least in terms of their right to pursue primary plans under the Private Cause of Action theory (“PCA”),[ii] but the courts have been faced with a new challenge—namely, what happens to those rights when an MAO transfers its right to sue under the MSP to a third party, such as a company that enters into an assignment agreement with an MAO. After a number of cases where standing was at issue,[iii] along comes Tenet.

In Tenet, an MAO (Florida Healthcare Plus, Inc. (“FHCP”)) paid for an enrollee’s medical bills, which had arisen from a car accident. The enrollee received treatment at St. Mary’s Medical Center. Two plans covered her treatment, with Allstate being her private insurer and primary payer, and FHCP, which also covered her treatment as the secondary payer. Instead of billing Allstate first, however, St. Mary’s billed both Allstate and FHCP for the same medical treatment. Both plans paid St. Mary’s.

Several months later, without any request from FHCP, St. Mary’s reimbursed FHCP for its full prior payment, or around $286. FHCP subsequently assigned its MSP Act claims to La Ley Recovery, which in turn assigned those claims to MSPA Claims 1, LLC (“MSPA”), a company formed to recover Medicare Part C claims held by MAOs. After the assignment, MSPA sued St. Mary’s and its parent hospital group, Tenet Florida, Inc. (“Tenet”) over the delayed $286 repayment to FHCP. Tenet moved to dismiss and the district court granted the motion. MSPA appealed to the 11th Circuit, which agreed with the district court.

In its decision, the 11th Circuit provided a very clear picture of the MSP’s statutory construct and attempted to clarify the role of MAOs. The court also took a hard look at the Private Cause of Action theory and determined that it permits MAOs (or their assignees) to sue primary plans but not medical providers.

Here are some key takeaways from the 11th Circuit’s findings:

1. Standing may be derived from a delayed repayment to a Medicare Part C plan. In arriving at that decision, however, the court’s review of the threshold question of standing led to its conclusion that a mere delay in payment could itself confer Article III standing. This should concern those parties who settle cases with Medicare Part C beneficiaries. The court found that although the Plaintiff (MSPA) was suing the wrong party, under a different fact pattern, a delayed payment can be considered a concrete injury for purposes of Article III standing, which requires that an injury-in-fact must be particularized and concrete. Here, the court determined that the fact St. Mary’s did not repay FHCP for several months met such criteria, relying on interest as damages analysis to hold that delay alone is a concrete injury for standing purposes.
   
   
2. Assigning MSP recovery rights may be valid despite an anti-assignment clause in the provider’s contract. The court further found that the chain of assignment (from FHCP to La Ley and from La Ley to MPSA) was valid based on a review of the assignment documents between those parties, despite the existence of an anti-assignment clause between FHCP and Tenet as part of a hospital services agreement. The court did not, however, examine whether the original contract between FHCP and Medicare permitted FHCP to assign its MSP Act repayment rights in the first place, which we submit is a critical point that still needs to be tested in the courts. Instead, the court noted that anti-assignment clauses operate to prevent the assignment of the underlying agreements, but does not prevent parties from assigning rights found outside of the agreement, such as those granted to MAOs under federal law. In the end, MSPA lost this battle because they were suing the wrong party, but the door was left open concerning Article III standing should an MAO sue the proper party under a Private Cause of Action theory.
   
   
3. Private causes of action are to hold primary plans accountable, not providers or other entities. Although the court was asked to opine only whether this MAO (MSPA as assignee from FHCP) could sue this provider (Tenet), and decided the Private Cause of Action does not permit such actions, the court’s very strong language shows this court’s bias toward strictly construing statutes. The court reasoned that the statutory language under the private cause of action is very clear and does not require further review of regulations or even a shallow dive into Congressional intent. That is because, to the court, the path for suing entities other than primary plans is already laid out under the government’s recovery rights of the MSP statute, under 42 U.S.C. Section 1395y(b)(2)(B). The court refused to accept MSPA’s argument that the Private Cause of Action can be used to sue other parties besides primary plans because of a cross-reference to Subsection 2(A) of the MSP statute, which further references the government’s broader recovery rights under Subsection 2(B) (noted above). The court read the provision to be clearly saying that if a plaintiff sues someone else, who has not paid, such as a medical provider, then the dispute does not involve a primary plan at all, and as such, the Private Cause of Action is not an available remedy.

The court also distinguished the cases where a primary plan fails to repay an MAO (or its assignee) from those where another entity fails to repay on a timely basis. The court reasoned that Congress intended to provide a way for primary plans to be held accountable under the private cause of action, but did not choose to extend such rights to any entity that fails to pay.

SO, WHERE DOES THAT LEAVE THE SETTLEMENT COMMUNITY?

• Tenet stands for the proposition that if an MAO validly assigns its MSP rights to a third party, that third party can sue a primary plan who does not promptly repay. That third party (here, MSPA) cannot, however, sue non-primary plans, such as a provider (here, Tenet). And given the strict constructionist view of the Private Cause of Action by this court, we submit that this holding would also extend (at least in the 11th Circuit) to other “entities that fail to pay” MAOs, such as the attorney who represents the Medicare beneficiary, or any other third party; even including trusts, qualified settlement funds, or lien resolution administrators.
  
  
• Where an MAO’s rights are limited, the government’s rights are not, as the United States is granted far broader rights to sue under the MSP Act, which would include any third parties who receive monies from primary plans.[iv]
  
  
• Finally, we still question whether the original contract MAOs sign with Medicare permits such assignments, but the court did not look that far to invalidate MSPA’s suit because it could stop at the plain language of the statute.

MSPA may decide to appeal to the Supreme Court, which is not likely to take up this issue unless there is a split in the circuit courts. However, we will continue to keep a close watch on this battle on the Medicare Part C waters, as we await other court rulings to see whether these privateers have their letters of marque restored or rescinded on behalf of the MAOs, under whose flag they are sailing to the courts.

[i]  Section 1862(b) of the Social Security Act, as codified in 42 U.S.C. Section 1395y(b).

[ii]  Aetna Life Ins. Co. v. Guerrera, 2018 WL 1320666 (D. Conn. Mar. 13, 2018) (MAO can sue insurer, but not attorney or Medicare beneficiary under the MSP); Humana v. Western Heritage, 832 F 3d 1229 (11th Cir. 2016) (MAO permitted to sue and recover double damages under PCA); Parra v. PacifiCare of Arizona, Inc., 715 F. 3d 1146 (9th Cir. 2013) (PCA was available to MAO, but Plaintiff did not bring claim against primary plan that interpleaded the funds subject to competing claims).

[iii]  See MSP Recovery Claims, Series LLC v. ACE Am. Ins. Co., 2018 WL 1547600 (S.D. Fla. Mar. 9, 2018); MAO-MSO Recovery II, LLC v. Mercury Gen., 2017 WL 5086293 (C.D. Cal. Nov. 2, 2017); MAO-MSO Recovery II, LLC v. Boehringer Ingelheim Pharm., Inc., 281 F. Supp. 3d 1278 (S.D. Fla. 2017); MSPA Claims 1, LLC v. Infinity Auto Ins. Co., 204 F. Supp. 3d 1346, 1347 (S.D. Fla. 2016), reconsideration denied, No. 16-20320-CIV, 2017 WL 4286852 (S.D. Fla. Sept. 27, 2017); see also MAO-MSO Recovery II, LLC v. State Farm Mut. Auto. Ins. Co., 2018 WL 340021, (C.D. Ill. Jan. 9, 2018). 

[iv]  See 42 U.S.C. Section 1395y(b)(2)(B)(iii) (granting the United States a right to recover from “any or all entities” that are or were required or responsible to make payment under a primary plan. In addition, the United States may recover from any entity that has received payment from a primary plan or from the proceeds of a primary plan’s payment to any entity.).