Ruling: Medical Providers Not Subject to Double Damages Under Medicare Secondary Payer Act

HIGHLIGHTS:

• In a matter of first impression, the U.S. District Court for the Middle District of Florida has ruled that a private right of action under the Medicare Secondary Payer Act (MSP Act), which provides for double damages in the event of untimely reimbursement of Medicare payments in certain circumstances, is unavailable against providers of medical services.
• Based on such ruling, the court dismissed with prejudice claims that had been raised under the MSP Act against Halifax Hospital Medical Center in Daytona Beach, Fla. In its motion to dismiss, Halifax argued, among other things, that the MSP Act's private right of action does not provide a remedy against providers of medical services.
• The ruling, unequivocally holding that a private right of action under the MSP Act is unavailable against a provider of medical services, is believed to be the first of its kind under the MSP Act.

In a matter of first impression, a federal court in Florida ruled on March 2, 2018, that a private right of action under the Medicare Secondary Payer Act, 42 U.S.C. §1395y(b) et seq. (MSP Act), which provides for double damages in the event of untimely reimbursement of Medicare payments in certain circumstances, is unavailable against providers of medical services. Based on such ruling, the court dismissed with prejudice claims that had been raised under the MSP Act against a public hospital based in Daytona Beach, Fla.

The ruling, unequivocally holding that a private right of action under the MSP Act is unavailable against a provider of medical services, is believed to be the first of its kind under the MSP Act.

Background

The case, MSPA Claims 1, LLC v. Halifax Health, Inc., is one of many lawsuits filed by MSPA Claims 1 LLC (MSPA) against various entities, seeking to certify a class of all Florida Medicare Advantage Organizations (MAOs) and recover double damages for alleged untimely reimbursement for medical payments. The case, however, is unusual insofar as MSPA targeted a provider of medical services, in this case a hospital, as opposed to the insurance companies usually named as defendants in the suits.

In the complaint, MSPA is alleged to be the remote assignee of a now-defunct MAO, Florida Healthcare Plus Inc. (FHCP). The complaint alleges that a Medicare Advantage enrollee of FHCP was involved in an motor vehicle accident and, as a result, received treatment at Halifax Hospital Medical Center (which was erroneously named in the plaintiff's complaint as Halifax Health Inc.). In addition to being covered by a Medicare Advantage plan administered by FHCP, the enrollee had $10,000 in uninsured motorist coverage. The uninsured motorist policy was primary and the MAO's obligations were secondary, with respect to the medical services provided by Halifax.

After the uninsured motorist insurer paid its full $10,000 policy limits, Halifax billed FHCP for the balance, by way of an invoice that reflected the $10,000 already received from the other insurer. FHCP, however, erroneously failed to offset the $10,000 already paid by the uninsured motorist insurer, and rendered payment to Halifax in the full amount of the covered charges, resulting in a $10,000 overpayment to Halifax. The plaintiff's complaint alleges that Halifax failed to reimburse the full $10,000 overpayment within 60 days of FHCP's payment. As a result, the plaintiff, as the alleged assignee of FHCP, brought suit in Florida state court in Miami, seeking to certify a class and recover double damages for each medical claim covered by the MSP Act that was not reimbursed within 60 days of a secondary payment by a MAO.

Change of Venue and Ruling

Halifax had the case removed from state court in Miami, then successfully had it transferred from the U.S. District Court for the Southern District of Florida, Miami Division to the U.S. District Court for the Middle District of Florida, Orlando Division. Halifax then obtained a stay of the case in the Middle District pending the District Court's ruling on Halifax's motion to dismiss the lawsuit. In its motion to dismiss, Halifax argued, among other things, that the MSP Act's private right of action does not provide a remedy against providers of medical services. In pertinent part, the MSP Act's private right of action provides:

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).

42 U.S.C. §1395y(b)(3)(A)

Halifax argued that MSPA had not sued a primary plan, and it was not alleged anywhere in the complaint that a primary plan failed to make primary payment. Indeed, the only primary plan identified in the complaint, the uninsured motorist insurer, paid its full $10,000 limit before FHCP made its erroneous overpayment.

Following extensive briefing, the District Court entered an order agreeing with Halifax's interpretation of the MSP Act's private right of action, ruling:

[T]he issue here is not [FHCP's] right to reimbursement; the issue is whether [FHCP's] assignee can pursue that right via the MSP Act's private right of action. By its terms, that right of action only applies to primary plans. [MSPA] offers no argument as to why it should also apply to entities, such as Halifax, that receive payment from primary plans. Count I will therefore be dismissed.

In light of this ruling, the District Court did not reach Halifax's alternative argument that the payment at issue in the case was not a "conditional payment" by an MAO under the MSP Act and was, instead, an erroneous overpayment made after payment of the primary insurer such that the remedies in the MSP Act did not apply.

Halifax is represented by the authors, Lawrence J. Hamilton II and Michael M. Gropper, of Holland & Knight.   

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