Is the Pot Calling the Kettle Black?

The United States, on behalf of the Department of Health and Human Services (DHHS), Centers for Medicare and Medicaid Services (CMS) division, recently filed a civil fraud action under the False Claims Act (FCA) against various United Health Medicare Advantage Plans (MAPs). (Case 2:09-cv-05013-JFW-JEM Filed 5/1/17, US District Court for the Central Division of California, Western Division). The Government’s Complaint alleged that the UnitedHealth Plans received improper payments under the Medicare Advantage Programs (MA Programs) due to their failure to objectively review enrollee diagnosis code data.

In order to understand the significance of this, a review of the MA Program is in order.  Medicare Part C plans or MAPs are run by private health insurance companies and provide an alternative to the traditional Medicare Part A and B plans available to Medicare beneficiaries.  Medicare pays each Medicare Advantage Organization (MAO), a fixed amount each month, for its enrollees. The amount paid to the MAO is based on the assessment of “risk“ factors tied to the health of each enrollee in the plan. Since higher “risk” factors are associated with higher future care expenditures, MAOs are paid more for enrollees with higher risk factors than for those with lower risk factors. Diagnosis codes, pulled from the enrollees’ medical records, are used to determine the “risk” factor. CMS also requires the MAOs to certify the accuracy of the enrollees’ diagnosis codes in an effort to prevent over reporting of diagnosis codes that would lead to higher payments to the MAOs. Effective compliance programs are required in order to prevent fraud.

The Government’s complaint alleges in part that UnitedHealth used outside coding vendors to direct the chart reviews to identify information leading to a higher risk value, while ignoring information that would lead to a lower risk value. UnitedHealth’s failure to “look both ways” allegedly resulted in a violation of the FCA. In addition, UnitedHealth failed to implement an effective compliance program for internal monitoring and auditing of relevant data. A jury trial has been demanded.

CMS’s frustration with being overcharged is one that is shared by workers’ compensation plans when it comes to conditional payment demands.  A few days after the Government filed the above Complaint, the US District Court for the Central District of California, filed its decision in the case of California Insurance Guarantee Association (CIGA) v Thomas E. Price, Secretary of Health and Human Services. (2017 U.S.Dist. LEXIS 67589, May 3, 2017). This decision was issued after consideration of the parties’ briefs on the relief that should be provided to CIGA, given its motion for partial summary judgment.

Our earlier blog discussed the initial action filed by CIGA, which stemmed from CIGA’s objection to CMS’s three reimbursement demands for payments made on service dates that included both work injury related and non-work injury related treatment charges. Although CMS subsequently dropped the demands, CIGA sought a judicial declaration and permanent injunction barring CMS from calculating conditional payments in this way. CIGA argued that this practice was contrary to the MSP and Medicare’s regulations. CMS argued that the action was moot, since CMS was no longer seeking reimbursement. It also argued that CMS’s practice is based on a reasonable interpretation of the MSP and implementing regulations. The adequacies of CIGA’s pleadings were also challenged as well as their “programmatic attack” on Medicare.

The Court rejected all of CMS’s arguments and granted CIGA’s Motion for Partial Summary Judgment. Briefs outlining the relief that should be provided to CIGA were requested by the Court.

In the instant May 3, 2017 decision, the Court noted that CIGA sought the following relief:  an order vacating CMS’s conditional payment demands in the three claims, a judicial determination that CMS’s conditional payment billing process is unlawful and a permanent injunction that would prohibit CMS from sending future reimbursement demands to CIGA based on this unlawful conditional payment billing process. CMS disputed the appropriateness of the relief being sought.

The Court agreed to issue an order vacating and setting aside CMS’ conditional payment demands in the three underlying claims. It rejected CMS’s argument that the issue was moot, specifically pointing out that CMS may issue new demands based on the same underlying charges.

CIGA was also granted a limited judicial declaration that CMS’s interpretation of the MSP in regards to conditional payment reimbursement is unlawful.  It stated the following: “One ‘item or service’, as used in the Medicare Secondary Payer statute, 42 U.S.C. Section 1395 y(b)(2)(B)(ii), does not as a matter of law, equate to any medical items, devices, supplies, or services that appear under in a single line-item charge on a payment summary form issued by CMS. Rather a statutory ‘item or service’ simply refers to one indivisible medical item, device, medical supply or service, regardless of how it is billed.” It further stated: “Whether a particular line-item charge on a payment summary form contains more than one indivisible medical item, device, medical supply or service is a factual question that must be resolved on a case-by-case basis.” When a single line-item charge on a payment summary form contains multiple diagnosis codes, the presence of one code covered by the insurance policy administered by CIGA, “does not ipso facto make CIGA responsible for reimbursing the full amount of the charge.”  (p. 5) The Court however declined to prohibit CMS from continuing its practice, citing an incomplete record on summary judgment along with a mention of the possible role that HCPCS/CPT codes may play in the various line-item charges.

The Court further denied CIGAs request for permanent injunctive relief, finding that the evidence before it did not meet the four-factor test for it.  The matter was set for bench trial in September of 2017.


Billing and recovery systems that are based on data involving diagnosis codes and HCPCS/CPT codes are only as good as the underlying data. As we can see from the Government’s civil fraud action above, this type of data, is subject to manipulation by Medicare Advantage Organizations. Similarly, physicians involved in the treatment of Medicare patients may also engage in fraud by submitting bills for upcoded treatment. CMS’s practice of seeking conditional payment recovery for treatment for conditions that are unrelated to the underlying workers’ compensation claim is also inappropriate. CMS’s failure to recognize this and to continue to pursue such recovery is a bit akin to the “pot calling the kettle black.”

The judicial declaration issued in the above CIGA case provides parties with another tool to challenge CMS’s improper conditional payment recovery attempts.   As noted in our prior blog, these arguments may also apply to “future conditional payment” projections included in a CMS reviewed Medicare Set-Aside, e.g., payment for a physician’s visit that treats an accepted condition and a denied condition is not an acceptance of both conditions.

We continue to recommend that parties carefully examine the charges listed in CMS’s Statement of Reimbursement.  Since many workers’ compensation laws require parties to secure itemized bills from providers, these bills and supporting medical records should also be used to dispute over-inclusive conditional payment recovery claims. The direct right of appeal process is also available and should be used.

We will keep you advised of further developments.

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