The U.S. District Court for the Central District of California (the Court) recently determined that the Centers for Medicaid and Medicare Service (CMS) cannot seek reimbursement from Worker's Compensation (WC) employers or primary insurers for unrelated medical charges when, in a conditional payment case, the health care provider's bill includes codes for medical conditions unrelated to the WC claim. The ruling in the California Insurance Guarantee Association vs. Burwell case gives WC claimants, their employers and their insurers an opportunity to dispute CMS demands for reimbursement for all coded services, regardless of whether they were related to the claim at issue.
The California Insurance Guarantee Association (CIGA) contested CMS's demand for reimbursement for the listed medical charges that appeared on a co-insured's health care bills. A common practice of many medical providers is to add ICD-10 codes to their records for all conditions reported by their patient, regardless of the cause. Over time, when CMS received those records, it sought reimbursement from the WC insurer for all listed codes, including those unrelated to the WC claim and therefore not covered by the WC insurer. The insurer (represented in this case by CIGA) sued to dispute CMS's demand to pay for services not covered by its insurance contract.
CMS argued four points in its defense, none of which survived judicial review. The Court commented:
The lower court opinion isn't a precedent because it wasn't issued by an appellate court. However, it is instructional for both CMS and WC insurers as to how they will do business in the future:
The Court determined that just because the task was difficult didn't eliminate the CMS's obligation to separate out covered claims from non-covered claims in its reimbursement demands. Moving forward, the Court indicated that CMS should at least attempt to limit its payment request to only the WC claims, but declined to suggest how the agency would go about doing that.
The decision also upends two presumptions upon which CMS has relied in pursuit of its reimbursement demands:
The Burwell decision was released just weeks ago, and, so far, there has been no appeal filed. What CMS elects to in response to the order is unknown. At the very least, the case suggests the agency may face additional litigation challenges by other insurers disputing the agency’s "blanket" reimbursement demands. CMS's own arguments suggest it may contest the Court's requirement that it apportion its claim to include reimbursement for only WC injuries. In any event, the California court has opened an avenue in which Insurers can dispute CMS reimbursement claims that overreach their contractual obligations.