A health care system’s claims against a Medicare Advantage (MA) plan for recouping payments were dismissed in federal court, because the health organization failed to exhaust its administrative remedies. The U.S. District Court for the Northern District of Georgia found that the claims of Tenet Healthsystem GB, Inc. (Tenet) against Care Improvement Plus South Central Insurance Company (Care Improvement) were “inextricably intertwined with a claim for Medicare benefits” and subject to administrative exhaustion requirements, even though the claims involved post-payment audits ( Tenet Healthsystem GB, Inc. v. Care Improvement Plus South Insurance Company, February 11, 2016, Duffey, W.).
Out of network services. Care Improvement provides MA coverage for Medicare beneficiaries who choose to enroll in privately managed plans and pay premiums for additional benefits. CMS also pays Care Improvement a fixed amount for each enrollee, and then Care Improvement pays for the care provided to enrollees regardless of whether CMS’ monthly payments or the enrollee’s premiums cover the costs of care. Providers participating in an MA’s network are reimbursed for services. In this case, Tenet’s various health care facilities did not have contracts with Care Improvement, but some Medicare enrollees covered by Care Improvement required treatment from these facilities.
Audits. Tenet stated that it obtained authorizations from Care Improvement to provide services in exchange for a promise of reimbursement. By doing this, Tenet waived its right to receive direct payment from the beneficiary patients. Although Care Improvement paid the submitted bills in full, it later conducted post-payment audits and then recouped substantial sums from Tenet. Although Tenet claimed to have challenged these recoupments, Care Improvement refused to return the payments.
Administrative process. The Medicare Act requires MA plans to cover emergency services even when they are provided by providers outside of the plan’s network, limited to the amount the provider would collect if the beneficiary was covered by original Medicare ( 42 U.S.C. §1395w-22(d)(1)(E); 42 C.F.R. section 422.214(a)). All attempts to recover on claims “arising under” the Medicare Act are subject to the administrative appeals process, including a provider requesting a determination related to payment from an MA plan for out-of-network services ( 42 C.F.R. section 422.566).
Tenet argued that the payment decisions were not MA organization determinations, and therefore were not subject to the administrative process. It pointed to a case in which the Fifth Circuit determined that claims for breach of contract, fraud, reliance, and violations of state law were not “inextricably intertwined” with claims for benefits. In contrast, Care Improvement pointed to other case decisions in which courts found that disputes between parties that did not have a network contract were “governed by a complex federal regulatory scheme.” The Georgia court was persuaded by Care Improvement, finding that because the two parties did not have a contractual relationship, CMS standards and Medicare regulations govern the relationship and the claims are therefore required to proceed through the administrative process. The court dismissed the case.