U.S. District Court Declares CMS Practice of Over-Inclusive Reimbursement Demands to be Unlawful, but Withholds Injunction

May 19, 2017

Earlier this year, Tower MSA summarized the California Insurance Guarantee Association’s (CIGA) case challenging the Centers for Medicare and Medicaid Service’s (CMS) practice of claiming conditional payment reimbursement on a charge which includes mixed diagnosis codes.  Mixed diagnosis codes result in the charge including both treatment related and unrelated to the workers’ compensation injury.  See Federal Court Holds Against Medicare Practice of Over-Inclusive Reimbursement Demands.  In a further decision in this case issued on 5/3/2017 (Cali. Ins. Guar. Ass’n v. Price, No. 2:15-cv-01113-ODW (FFMx), 2017 U.S. Dist. Ct. LEXIS 67589), Judge Otis D. Wright, II, set-aside Medicare’s reimbursement claims against CIGA and issued a judicial declaration finding CMS’s practices pertaining to reimbursement unlawful, but stopped short of enjoining CMS from continuing these practices.

January Decision Finds in Favor of CIGA

The recent decision by the District Court follows an earlier 1/5/2017 decision from Judge Wright finding in favor in CIGA.  Key findings were as follows:

First, the Court held that because Defendants simply withdrew the reimbursement demands without renouncing their allegedly unlawful policy, no part of CIGA’s claims were moot.

Second, insofar as CIGA sought simply to challenge CMS’s blanket practice of seeking reimbursement from primary plans for the full amount of a charge that contained uncovered diagnosis codes, CIGA met its burden simply by identifying codes that all parties agree are uncovered.

Third, the Court held that one statutory “item or service” does not as a matter of law equate to whatever medical procedure(s) are billed for in a single line-item charge on a payment summary form; rather, a statutory “item or service” simply refers to one indivisible medical item, device, medical supply, or service, regardless of how it is billed.

Fourth, in the event that a single line-item charge contains one covered “item or service” and one uncovered “item or service,” CIGA does not have a responsibility to make payment for the uncovered “item or service” just because it was lumped together with a covered “item or service.”

Finally, the Court also notes what it did not decide. The Court did not decide: (1) whether the cost of a single indivisible “item or service” must be apportioned among multiple diagnosis codes; or (2) whether each individual line-item charge in this lawsuit in fact consisted of multiple “items or services.”

As a result of the January decision CIGA was entitled to relief which the Court attempted, without success, to have CIGA and CMS resolve between themselves. Consequently, CIGA requested an order vacating CMS’s reimbursement claim of $119,122, a judicial declaration that CMS’s billing practice is unlawful and a permanent injection prohibiting CMS from sending future reimbursement demands to CIGA based on the unlawful billing practice.

An example of this practice is where a Conditional Payment Summary Form includes one line item representing multiple divisible treatments such as a physician visit where the services provided were for hypertension, a flu shot and low back pain.  Only the low back pain is related to the work injury, but the charge listed on the Conditional Payment Summary Form is for all treatments, not just the low back pain.

Court Provides Judicial Declaration, but No Injunction Against CMS Practices

In response to CIGA’s request, the Court vacated CMS’s reimbursement claim of $119,122 and issued a judicial declaration that CMS’s billing practice is indeed unlawful.  The Court refused though to enjoin CMS from these billing and reimbursement practices.

While the Court went into an extensive explanation as to why an injunction would not be warranted, in Judge Wright’s words it comes down to the following:

. . . the Court is not confident that it possesses a complete understanding of how determinations regarding the contents of a line-item charge are, can, or should be made, and the Court is not inclined to issue a broad judicial declaration that might ultimately require the parties to adopt an inefficient and unworkable reimbursement process going forward.

The Court went on to note that primary plans (carriers and employers) now have an administrative appeals process available to them (The five level appeals process put in place as a result of the SMART Act) to appeal reimbursement claims, rather than first seeking relief in federal court, as was done in this case.

While the Court declined to issue an injunction, it nonetheless agreed to set the case for a bench trial (9/12/2017 trial date set) to gather further facts, likely related to how a line-item charge may be separated into divisible treatments such that the injury-related treatment only can be claimed for reimbursement. Based upon a review of the evidence presented at trial, the Court will decide whether to issue an injunction.

Tower MSA Analysis: Court’s Decision Attempts to Balance the Interests of CIGA and CMS

The Court here is understandably trying to balance the interests of CIGA in not being forced to reimburse CMS for charges unrelated to the claimed workers’ compensation injury, against the interests of CMS in not having its reimbursement processes disrupted.  If this case does go to trial, what Judge Wright will be looking for is a way to enjoin CMS from over-inclusive reimbursement demands without significantly impacting CMS’s ability to recover on legitimate claims.  

Ultimately, this may prove difficult for the Court unless CMS steps up and agrees to work with its recovery contractors to better filter its claims for reimbursement such that one line item on a Conditional Payment Summary Form only includes treatment related to the claimed injury, workers’ compensation or otherwise.  If CMS refuses to make these changes then the Court will either have to issue the injunction and force CMS’s hand or let the decision stand without the injunction.  Even if an injunction is not issued, this case should be persuasive to other courts and hopefully CMS when it is cited in disputes and appeals of CMS reimbursement claims which contain mixed diagnosis codes.  

Another question is whether depending upon the outcome of the trial, either party will appeal the District Court’s decision to the U.S. Court of Appeals.  CIGA may appeal as a result of the lack of an injunction or CMS may appeal if an injunction is the result of the trial or based upon the judicial declaration regarding its billing and reimbursement practices.  Tower MSA will continue to follow this important case and provide relevant updates.