Opinion ID: 63773
Heading Depth: 1
Heading Rank: 5

Heading: Could Baton Rouge General opt out of Medicaid in order to pursue recovery from the tortfeasor?

Text: We turn now to the issue of provider reimbursement. Alfaro argues that federal and state statutes and regulations limiting the ability of providers to obtain reimbursement for their services under Medicaid prohibit Baton Rouge General from enforcing its hospital lien. Federal law does not require health care providers to participate in a state's Medicaid program. See 42 U.S.C. § 1396a(a)(23) (a state Medicaid plan must provide that any individual eligible for medical assistance... may obtain such assistance from any institution, agency, community pharmacy, or person qualified to perform the service or services required ... who undertakes to provide him such services .... (emphasis added)). See Barney v. Holzer Clinic, Ltd., 110 F.3d 1207, 1211-12 (6th Cir.1997) (The extremely detailed federal Medicaid statute does not require a particular hospital to participate in the Medicaid program.). Instead, a health care provider voluntarily contracts with [a] state to provide services to Medicaid-eligible patients in return for reimbursement from the state at ... specified rates. Spectrum Health Continuing Care Group v. Bowling, 410 F.3d 304, 313 (6th Cir.2005). Even those health care providers that do choose to serve patients under Medicaid need not accept all such patients. Barney, 110 F.3d at 1211-12 (citing 42 U.S.C. § 1396a(a)(23) and 42 C.F.R. § 431.51(b)(1)). [7] Barney adds: Because the remuneration provided under Medicaid is often significantly less than that provided by private insurers or Medicare, health care providers, either in the interest of higher profits or merely to remain solvent, sometimes limit the number of Medicaid patients they will accept. So long as these strategies do not otherwise violate the Medicaid statute or other federal antidiscrimination laws they are not in themselves prohibited. Id. (citation omitted). What Medicaid does not allow is for a provider who accepts Medicaid coverage for a patient to recover more than the program's reimbursement rates for care. See 42 C.F.R. § 447.15. Moreover, a state plan must provide that in the case of an individual who is entitled to medical assistance under [a] State plan with respect to a service for which a third party is liable for payment, the person furnishing the service may not seek to collect from the individual (or any financially responsible relative or representative of that individual) payment of an amount for that service if third party liability equals or exceeds the amount Medicaid will pay. 42 U.S.C. § 1396a(a)(25)(C); see also 42 C.F.R. § 447.20(a). Louisiana accordingly requires health care providers that want to participate in the state's Medicaid program to agree to [a]ccept payment from [Medicaid] as payment in full, and not to bill or collect any additional amount from the recipient or the recipient's responsible party.... LA.REV.STAT. ANN. § 46:437.12(10)(a); [8] see also LA.REV.STAT. ANN. § 46:446.5(B) (further implementing limitation of recovery from individual third parties above Medicaid limits). Alfaro asserts that these limitations prohibit Baton Rouge General from enforcing its lien against the tort settlement he recovered from Allied. Specifically, he contends that the hospital's enforcement of its lien is an impermissible effort to collect payment from a Medicaid-eligible patient when a third party, Allied, is liable for the patient's medical expenses. Baton Rouge General counters that enforcement of the lien is permissible because it is trying to recover from Allied, not Alfaro. We assume, without deciding, that under Louisiana's hospital lien statute Baton Rouge General by enforcing its lien is seeking to collect payment from Alfaro rather than Allied. Alfaro's central argument is that once a patient becomes eligible for Medicaid a health care provider cannot seek to collect payment from that patient if a third party is liable for the patient's medical expenses. This argument, however, is inconsistent with the voluntary nature of the hospital's participation in the program. Case law uniformly indicates that the limitations on provider reimbursement are triggered not when a patient becomes eligible for Medicaid, but when a provider elects to bill and accepts payment from Medicaid for the services it provides to the patient. See, e.g., Spectrum Health Continuing Care Group v. Bowling, 410 F.3d 304 (6th Cir. 2005); Evanston Hosp. v. Hauck, 1 F.3d 540 (7th Cir.1993); Mallo v. Pub. Health Trust of Dade County, 88 F.Supp.2d 1376 (S.D.Fla.2000). [9] In particular, the courts have interpreted 42 U.S.C. § 1396a(a)(25)(C), which provides that a state Medicaid plan must prohibit health care providers from collecting payment from a patient entitled to Medicaid if a third-party is liable for the patient's medical expenses, as a prohibition on balance billing and substitute billing. See, e.g., Spectrum, 410 F.3d at 314; Evanston, 1 F.3d at 542. Balance billing occurs when a provider accepts payment from Medicaid and then seeks to recover from the patient the balance between that payment and its customary fee. See Spectrum, 410 F.3d at 314. Substitute billing occurs when a provider accepts payment from Medicaid and then tries to return the payment in order to recover its entire customary fee from the patient. See, e.g., Evanston, 1 F.3d at 542. Logically, a provider cannot attempt to engage in balance billing or substitute billing unless it has initially billed Medicaid. Therefore, the prohibition against these practices is not triggered until a provider bills and accepts payment from Medicaid for services provided to a Medicaid-eligible patient. In Evanston, the Seventh Circuit held that billing and accepting payment from Medicaid prevented a hospital from later seeking to enforce its hospital lien against the damages award a patient recovered from a third-party tortfeasor liable for his medical expenses. 1 F.3d at 542. There, a hospital treated an uninsured, Medicaid-eligible patient who suffered injuries in an accident. The hospital billed and accepted payment from Medicaid for the services it furnished to him. After receiving the Medicaid payment, which was less than its customary fee, the hospital served a hospital lien on a personal injury lawsuit brought on the patient's behalf against the third party tortfeasor. Evanston Hospital v. Hauck, No. 92 C 732, 1992 WL 205900, at  (N.D.Ill. Aug. 19, 1992) (unpublished). Several years later, when the patient won a multimillion dollar judgment in his personal injury lawsuit, the hospital sought to enforce its lien against the judgment to recover its full customary fee. The Seventh Circuit concluded that the hospital could not return the Medicaid payment and enforce its lien because it had already accepted money from Medicaid for the services it furnished to the patient. The court, however, explicitly stated that the hospital could have enforced its lien against the patient's damages award if it had not accepted the Medicaid payment: Evanston Hospital was not forced to abandon its right to sue Hauck; no one coerced the hospital into cashing a $113,424 check from the taxpayers as partial reimbursement for Hauck's medical bills. Rather, the hospital could have simply forsaken Medicaid and taken its chances that Hauck would somehow come up with the money to pay the bills himself. By opting for reimbursement from Medicaid, Evanston Hospital bought certainty. It purchased a guarantee of partial payment in lieu of possibly full payment or possibly no payment at all. Risk-averse companies that are owed money (or which do not want the hassle) make this same deal all the time with collection agencies-something secure is traded for a crack at a higher sum. Evanston Hospital wants out of its agreement with Medicaid now only because its gamble, in retrospect, was unwise. Evanston Hospital, 1 F.3d at 542. The Sixth Circuit reached the same conclusion in Spectrum. In that case, a health care center treated a patient who had been injured during a botched surgery. At the time she was admitted to the center, the patient was uninsured and ineligible for Medicaid. The center agreed to admit her on the condition that she execute a lien on the proceeds of any settlement or verdict she recovered in a medical malpractice lawsuit. Five months after the patient was admitted to the center, she became eligible for Medicaid. Because the center did not know when, or if, it would recover on its lien, it decided to bill and accept payments from Medicaid for her medical care. These payments were less than the center's customary fees. Three years later, when the patient recovered a settlement from a third-party tortfeasor, the center tried to enforce its lien against the settlement to recover the balance between the Medicaid payments it had accepted and its customary fees. As in Evanston Hospital, the Sixth Circuit denied recovery because the center had already accepted Medicaid payments as payment in full and enforcing the lien would be an attempt to recover from the patient when a third party was liable for her medical expenses. The court noted, however, that the hospital could have avoided this result: Spectrum [the health care center] was not required to seek payment from Medicaid; instead, Spectrum could have provided its services in exchange for enforcing its lien, which was the original agreement between the parties. Having chosen to accept payment from Medicaid however, Spectrum abandoned all rights to further recovery of its customary fee from the lien. As we have stated, Medicaid is a contract between a service provider and the government, in which the Medicaid recipient is a third-party beneficiary. By accepting the Medicaid payment, the service provider accepts the terms of the contract  specifically that the Medicaid amount is payment in full. If this arrangement is not acceptable to [service providers], they should not take Medicaid money in the first instance. Spectrum, 410 F.3d at 315 (internal quotation marks and citations omitted). Moreover, the court remarked that [if the health care center] had not received Medicaid payments, the lien would be enforceable against [the tort settlement] as a voluntary agreement entered into by willing parties, even though the patient was Medicaid-eligible. Spectrum, 410 F.3d at 316 (citation omitted). Once the health care center accepted the Medicaid payment, however, [it] had been paid in full for the services provided to [the patient]. The mere fact that a prior voluntary agreement existed is without consequence. Spectrum, 410 F.3d at 316 (footnote omitted). In Mallo v. Public Health Trust of Dade County, 88 F.Supp.2d 1376 (S.D.Fla.2000), the court held that after a hospital accepted payment from Medicaid it could not enforce a pre-existing lien against a tort settlement recovered by the patient. But the court noted that the hospital could have enforced its lien if it had not accepted payment from Medicaid. Specifically, the court stated that the federal mandate prohibiting balance billing, 42 U.S.C. § 1396a(25)(C), [f]orc[es] providers to make a calculated choice whether to apply for Medicaid assistance. Once a health care provider commits to Medicaid assistance for a patient, the provider is barred from billing the patient for an amount in excess of the State's Medicaid disbursement. By contrast, should the health care provider elect not to apply for Medicaid assistance, then the provider can charge the market value of the treatment. Mallo, 88 F.Supp.2d at 1386-87 (footnote omitted). From these cases, it is clear that the limitations on a health care provider's ability to obtain reimbursement for the services it provides a Medicaid-eligible patient are not triggered until a provider bills and accepts payment from Medicaid for those services. If a provider chooses not to bill and accept payment from Medicaid, then it remains free to seek its entire customary fee from the patient. Of course, the provider runs the risk of not recovering anything from the patient because the patient may never have the ability to pay his medical expenses, or the third party payment may not come to fruition. The federal Medicaid scheme, however, gives providers the opportunity to make a calculated choice whether to seek reimbursement from Medicaid or from the patient. Like Spectrum and Mallo, this case involves a provider that asserted a hospital lien on any tort settlement or judgment recovered by an indigent patient before the patient became eligible for Medicaid. Those cases clearly recognized that a provider could assert its pre-existing hospital lien, even after a patient became eligible for Medicaid, so long as the provider did not bill and accept payment from Medicaid. The providers in Spectrum and Mallo were both precluded from enforcing their pre-existing hospital liens because they chose to bill and accept payment from Medicaid. But, in this case, Baton Rouge General did not bill and accept Medicaid. Instead, it made the calculated choice to enforce its lien rather than bill Medicaid. The fact that Alfaro became eligible for Medicaid after Baton Rouge General established its lien and after he was discharged from the hospital does not strip the hospital of its pre-existing lien against his tort settlement, which is enforceable because Alfaro is in debt to the hospital for his medical bills. See LA.REV.STAT. ANN. § 9:4751 et seq.