A Win for Insurance Carriers: Part of CMS’s Bill Recovery Practice Deemed Unlawful

The court in CIGA v. Price, 2017 WL 1737717 (C.D. California, May 3, 2017) has issued a new ruling limiting Medicare’s conditional payment rights. The case has potentially significant impact on the Centers for Medicare & Medicaid Services (“CMS”) recovery claims.

In the case, CIGA disputed CMS’ billing practice of seeking full reimbursement of a medical provider’s single charge where some portion of that charge was unrelated to services covered by the insurance plan. CIGA argued that CMS’s practice of collecting the full amount, inclusive of the uncovered charges, was improper under the Medicare Secondary Payer Act and that it resulted in an over broad conditional payment recovery. CIGA sought a court ruling that the practice was unlawful and also a permanent injunction preventing CMS from utilizing the policy in the future.

The court agreed that CMS’ practice was unlawful and vacated and set aside the disputed portions of CMS’ recovery demands against CIGA. The court suggested that CMS would need “to determine whether some sort of apportionment…is warranted, and if so, by how much” should it seek recovery on the bundled and disputed charges in the future.

The court also addressed the bundling of the charges, and stated if a single line-item charge on a payment summary form contains multiple diagnosis codes—some of which relate to a medical condition covered by an insurance policy and some of which do not—the presence of one covered code does not ipso facto make the carrier responsible for reimbursing the full amount of the charge. The court declared that it was proper for the carrier to refuse to pay the uncovered item that was billed together with the covered item.

Notwithstanding the foregoing decision, and while CMS’ billing practice was ruled unlawful, the court declined to go so far as issuing a permanent injunction against CMS. The court did not want to issue the injunction for fear that doing so could substantially disrupt other aspects of CMS’s operations. The court further reasoned that an injunction was not necessary because the workers’ compensation carrier had access to the administrative appeals process to challenge future recovery demands made by CMS.

The court’s decision could prove useful to insurers challenging CMS recovery claims when CMS attempts to obtain full recovery on a single charge that includes items and services for which the insurance carrier is not responsible. The decision is only binding in California, but may provide persuasive authority to challenge CMS’ bill recovery practices in other jurisdictions.

CIGA v. Price, 2017 WL 1737717 (C.D. California, May 3, 2017)

Simone H. Yoder