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By Jason D. Lazarus, J.D., LL.M., MSCC, CSSC

In yet another example of Medicare compliance related issues, a Houston law firm and its managing partner have been sued by the government for failing to pay back Medicare conditional payments.  This is a unique situation though as plaintiff counsel did properly report the settlement to Medicare and attempted to resolve it, albeit through improper channels.  In March of 2020, the United States Attorney in Texas filed suit on behalf of the Centers for Medicare and Medicaid Services (CMS) against the firm and the managing partner to recover the unpaid conditional payments plus interest, fees and costs.  While it has become commonplace for the Department of Justice to pursue lawyers and law firms for failing to reimburse Medicare conditional payments in the recent past, those were situations where Medicare’s right to reimbursement were completely ignored.  Here that was not the case; instead the law firm notified CMS’ Benefits Coordination & Recovery Center (BCRC) of the lawsuit and communicated with them about settlement but ultimately the firm disagreed with the final demand amount.  Instead of requesting an appeal, the matter was addressed in Texas state court.  It is a cautionary tale in terms of following proper procedures if one does decide to challenge the amount owed to Medicare under the Medicare Secondary Payer Act (MSP).

Attorney Stephen P. Carrigan and his firm represented Tomas Tijerina in a personal injury lawsuit related to a car accident in April of 2014.  In April of 2016, Mr. Carrigan’s firm notified the BCRC about Tijerina’s accident, his resulting injuries and lawsuit to recover damages.  In March of 2017, Carrigan properly notified BCRC that the personal injury case had been settled for $70,000.00.  The next month, in April, BCRC sent out an Initial Determination with a payment summary detailing the $46,244.74 that Medicare was claiming as required reimbursement.  That same month, Carrigan filed a motion in Texas state court challenging the amount asserted by Medicare and notified Medicare of the pending action in state court.  In July of 2017, Medicare issued its Final Demand letter for $47,343.05 which included the related medical expenses plus statutory accrued interest.  In August of 2017, Carrigan sent to Medicare an order issued by the state court that reduced Medicare’s Conditional Payments by 90% down to $4,700 along with a check for the $4,700.

That brings us to March of 2020 where the U.S. Attorney, Ryan Patrick, filed suit against Carrigan and his firm in the United States District Court for the Southern District of Texas.  Central to the lawsuit is the issue of the Texas state court lacking jurisdiction to adjudicate Medicare’s recovery of conditional payments under federal law.  In the complaint, Mr. Patrick pointed to sovereign immunity and the fact that the Texas state court lacked subject matter jurisdiction related to conditional payments made under the MSP.  He outlined that proper challenges, disputes or attempts to reduce/avoid reimbursement due to Medicare for conditional payments must go through the administrative appeal process set out in the Medicare Act and regulations.  According to the complaint, only after exhaustion of those administrative remedies can a claim be made to a United States District Court, which has exclusive subject matter jurisdiction to hear claims under the MSP.  There is plenty of case law on that point and it is a winning argument.  The complaint also laid out the liability for an attorney who fails to reimburse Medicare under 42 U.S.C. § 1395y(b)(2)(B)(ii); 42 C.F.R. § 411.24(g).

It is very likely that the suit by the government will be successful and the attorney will be liable for the full lien amount plus interest, fees and costs.  The fact that the state court had no jurisdiction and based its order on applying Ahlborn, a Medicaid lien decision, to a Medicare conditional payment means there is little likelihood that the federal district court will respect the state court’s ruling.  Sovereign immunity and preemption by federal law alone prevents the state court ruling from being given any consideration at all by the federal court.  This all could have been avoided by paying the final demand and then seeking a compromise/waiver.  By doing so, you avoid the interest meter from continuing to run and eliminate the need to engage in lengthy appeals involving exhaustion of administrative remedies within Medicare.  If Medicare grants a compromise or waiver, they issue a refund back to the Medicare beneficiary.  There are three viable ways to request a compromise/waiver.  The first is via Section 1870(c) of the Social Security Act which is the financial hardship waiver and is evaluated by the BCRC.[1]  The second is via section 1862(b) of the Social Security Act which is the “best interest of the program” waiver and is evaluated by CMS itself.[2]  The third way is under the Federal Claims Collection Act and the compromise request is evaluated by CMS.[3]  If any of these are successfully granted, Medicare will refund the amount that was paid via the final demand or a portion thereof depending on whether it is a full waiver or just a compromise.

The critical takeaway is that an attorney must use the proper channels for challenging conditional payments owed to Medicare.  There are multiple considerations before deciding to appeal or seek a compromise/waiver of conditional payments.  Certain steps are necessary to resolve a conditional payment which includes audit/verification of the amount after receiving the conditional payment letter and securing a final demand by providing final settlement details to Medicare.  Failure to resolve a conditional payment exposes a trial lawyer to personal liability for the amount of the conditional payment and the government does pursue lawyers individually if they fail to reimburse Medicare, so be very careful when it comes to dealing with Medicare as you do not want to become a cautionary tale.  You and your firm never want to be in this position or have the possibility of a double damages claim by the government.  The key here is to work with competent experts when it comes to Medicare compliance.  Synergy specializes in protecting law firms against this sort of precise scenario by being your Medicare compliance expert partner.

[1] 42 U.S.C. § 1395gg

[2] 42 U.S.C. § 1395y

[3] 31 U.S.C. § 3711

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