Opinion ID: 894907
Heading Depth: 1
Heading Rank: 5

Heading: Medicare Administrative Remedies

Text: In a case strikingly similar to this one, the United States Court of Appeals for the Fifth Circuit Court recently considered whether a healthcare provider that contracted with a Medicare Advantage organization had to pursue administrative remedies before filing suit. RenCare, Ltd. v. Humana Health Plan of Tex., Inc., 395 F.3d 555 (5th Cir.2004). Humana, a Medicare Advantage HMO, contracted with RenCare to provide kidney dialysis services to Humana's enrollees. Id. at 556-57. Humana and RenCare then disagreed about reimbursement for end-stage renal dialysis services that RenCare provided to the enrollees, and RenCare sued Humana in Texas state court, alleging breach of contract, detrimental reliance, fraud, and violations of state law. Id. at 557. Humana removed the claims to federal district court, arguing that RenCare's claims were preempted by the Medicare Act. The federal district court ultimately dismissed RenCare's claims relating to Medicare Advantage enrollees, finding that RenCare had failed to exhaust its administrative remedies under the Medicare Act. Id. The Fifth Circuit reversed, concluding that: (1) RenCare's claims did not arise under the Medicare Act, and (2) there were no administrative remedies for RenCare to exhaust. Id. at 558. As to the first issue, the court considered Heckler v. Ringer , the seminal case discussing whether a claim `arises under' the Medicare Act. Id. at 558 (citing Heckler v. Ringer, 466 U.S. 602, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984)). In Heckler, three individuals who had been denied reimbursement for bilateral carotid body resection (BCBR) surgery sued the Secretary of Health and Human Services. The plaintiffs sought an invalidation of the Secretary's policy against BCBR reimbursement, a declaration that the surgery expenses were reimbursable, and an injunction barring the Secretary from forcing claimants to pursue administrative appeals in order to obtain payment. 466 U.S. at 611, 104 S.Ct. 2013. The Supreme Court concluded that because the claims were not anything more than, at bottom, a claim that they should be paid, they were inextricably intertwined with a claim for benefits and therefore arose under the Medicare Act. Id. at 614, 104 S.Ct. 2013. The Fifth Circuit, distinguishing Heckler, concluded that RenCare present[ed] a vastly different situation. RenCare, 395 F.3d at 558. There, Medicare enrollees were not denied services or reimbursement for services. The court noted that RenCare waived its right to seek payment from enrollees, and the government, having tendered its capitation payment, no longer had a financial interest in the case. Id. Thus, Humana bore the ultimate responsibility for providing services to its Medicare Advantage enrollees, and [w]ith the government's risk extinguished, any dispute over payment to RenCare is solely between RenCare and Humana. Id. at 559. While the Fifth Circuit's holding on this point is persuasive, [8] it is unclear whether Heckler's arising under test even applies to Medicare Advantage claims. See Stephen M. Elwell, Note, Preemption of Contract Claims by the Medicare Act: An Analysis of the Recent Holding in Lifecare Hospitals v. Ochsner Health Plan, 24 REV. LITIG. 125, 127 (2005) (noting that [c]ourts must also decide whether the test in Heckler applies to claims arising under the Medicare Advantage program and noting that Heckler was based on claims arising under the traditional Medicare program, not Medicare Advantage). Amicus HHS urges that Heckler is an unfortunate . . . red herring that has been interjected into this dispute and that [t]he significance of the `arising under' analysis set forth in Heckler is relevant only for purposes of assessing subject matter jurisdictional issues in federal court when plaintiffs pursue `action[s] against the United States, the [Secretary of HHS], or any officer or employee thereof.' 42 U.S.C. § 405(h) (as applied to Medicare by 42 U.S.C. § 1395ii). Aetna contends that it should be considered an officer or employee of the United States or the Secretary and, therefore, that Heckler's arising under test controls. We need not decide that question today, however, as we agree with the RenCare court's second conclusion: it appears that the administrative review process attendant to Part C does not extend to claims in which an enrollee has absolutely no interest. Id. The court noted that Part C and CMS's implementing regulations establish mandatory administrative appeals procedures to resolve disputes over organization determinations. [9] Id. (citing 42 U.S.C. § 1395w-22(g); 42 C.F.R. § § 422.560-422.622). An organization determination is a decision by a Medicare Advantage organization regarding the benefit an enrollee is entitled to receive under [a Medicare Advantage] plan . . . and the amount, if any, that the enrollee is required to pay for a health service. 42 C.F.R. § 422.566(a) (emphasis added). More specifically, an organization determination may be the Medicare Advantage organization's refusal to provide or pay for services, in whole or in part, . . . that the enrollee believes should be furnished or arranged for by the [Medicare Advantage] organization. 42 C.F.R. § 422.566(b)(3) (emphasis added). Enrollees have a right to a timely organization determination, 42 C.F.R. § 422.562(b)(2), and a right to appeal that decision through several levels of review. 42 C.F.R. § 422.562(b)(4)(i)-(vi). However, if an  enrollee has no further liability to pay for services that were furnished by [a Medicare Advantage] organization, a determination regarding these services is not subject to appeal. 42 C.F.R. § 422.562(c)(2) (emphasis added). The court concluded: As is evident from the regulations, the administrative review process focuses on enrollees, not health care providers, and is designed to protect enrollees' rights to Medicare benefits. Here, Humana's failure to pay RenCare is not an organization determination subject to the mandatory exhaustion of administrative remedies. No enrollee has requested an organization determination or appeal. No enrollee has been denied covered service or been required to pay for a service. Rather, the [Medicare Advantage] enrollees in this case bear no financial risk inasmuch as they have already received the services for which RenCare seeks reimbursement. In fact, there is a complete absence of [Medicare Advantage] beneficiary interest in this dispute. The only interest at issue is RenCare's interest in receiving payment under its contract with Humana. RenCare, 395 F.3d at 559-60. Here, although the parties did not contract directly with each other, each had agreements with NAMM. Consequently, their dispute concerns not whether the services were covered under Medicare, but rather who should bear the loss associated with NAMM's failure to pay. Aetna staunchly alleges it discharged its duties by making monthly payments to NAMM; the Hospitals, on the other hand, assert that Aetna is nonetheless ultimately responsible under the Texas Insurance Code and federal law. Aetna asserts that NAMM's (and subsequently Aetna's own) failure to pay the claims is tantamount to a denial of coverage, and the Hospitals should have exhausted administrative remedies under the Medicare Act before proceeding in state court. We disagree. Aetna's contention that the Hospitals must first seek an administrative determination of some 6,000 claims misconstrues a claim seeking payment for services provided to Medicare patients as a claim for Medicare benefits. That is, failing to pay due to insolvency or a dispute about who is contractually obligated to pay is different from failing to pay due to lack of coverage. The Hospitals are not challenging an organization determination, as they must to fall under the mandatory statutory scheme, and the court of appeals erred in concluding otherwise. See 42 C.F.R. § 422.566(b); 167 S.W.3d at 887. As in RenCare, no enrollee has been denied covered services or been required to pay for a service, and the federal government's risk has been extinguished. RenCare, 395 F.3d at 559. Aetna's petition against NAMM asserted that NAMM breached its agreement with Aetna by failing to pay for covered services; Aetna's contention that its refusal to pay now means there is no coverage confuses Medicare coverage with Aetna's potential liability for NAMM's default. The federal administrative scheme exists, first and foremost, to protect enrollees' rights to health care, not to act as a de facto claims administrator for Medicare Advantage organizations and their delegates. Amicus curiae HHS urges that requiring the Hospitals to exhaust administrative remedies before coverage decisions have been made would turn the administrative scheme on its head, and we agree. Nor is it dispositive that there apparently was no contract directly between Aetna and the Hospitals. The regulations make it clear that enrollees cannot incur liabilities for payment of any fees that the Medicare Advantage organization is legally obligated to pay. 42 C.F.R. 422.504. This prohibition on enrollee liability extends to providers who contract directly with the Medicare Advantage organization as well as those that do not. Id. § 422.504(g) (Medicare Advantage organization must [e]nsure that all contractual or other written arrangements with providers prohibit the organization's providers from holding any beneficiary enrollee liable for payment of fees that are the legal obligation of the [Medicare Advantage] organization and [i]ndemnify the beneficiary enrollee for payment of any fees that are the legal obligation of the Medicare Advantage organization for services furnished by providers that do not contract, or that have not otherwise entered into an agreement with the [Medicare Advantage] organization, to provide services to the organization's beneficiary enrollees). As CMS told the Hospitals in its March 30, 2001 letter, the lack of a contract directly with an HMO does not necessarily exempt a provider from the prohibition against balance billing, and the 42 C.F.R. 422.502(g)(1) provision applies to contracted downstream providers. As in RenCare, therefore, enrollees are protected from liability for fees that the Medicare Advantage organization must pay, and the only interest at issue here is the Hospitals' interest in receiving payment from the Medicare Advantage organization. Whether those fees are in fact Aetna's legal obligation is a matter within the trial court's jurisdiction.