The U.S. Court of Appeals for the 11th Circuit issued its opinion in
Tenet Healthsystem GB, Inc. v. Care Improvement Plus South Central
on Aug. 18, setting up a brewing circuit split with the 6th Circuit’s 2016
decision in Ohio State Chiropractic Ass’n. v. Humana Health Plan, Inc.The
central issue in both cases is whether a noncontracted hospital must first
exhaust Medicare administrative remedies before suing a Medicare Advantage
Organization (MAO) over payment disputes.
In the 11th Circuit case, several hospitals treated the health plan’s
members after obtaining authorization for the services. Later, the health
plan determined that the services were not covered and recouped payment.
The hospitals sued in federal court and the district court dismissed the
case based on the conclusion that the hospitals, as noncontracted
providers, must pursue and exhaust the administrative remedies available to
Medicare providers pursuant to 42 C.F.R. Part 422.
On appeal, the 11th Circuit affirmed, holding that the hospitals must
pursue and exhaust their remedies because they were parties to an
“organization determination” as de facto assignees of the health plan’s
members, since they agreed to hold the members harmless and not bill them
for the services rendered. The court expressed its sympathy for the
hospitals and the Department of Health and Human Services’ concerns — which
the government articulated in amicus briefs — about the backlog of Medicare
appeals. However, the court explained that if “this result strains the
resources of [the Centers for Medicare and Medicaid Services], any solution
must come from Congress or the agency.”
In Ohio State Chiropractic Association, the health plan recouped
payments from a noncontracted provider after it overpaid the provider due
to a computer “glitch.” The provider sued in state court, and the health
plan removed the matter to federal court based on the “federal officer”
doctrine and moved to dismiss the case based on the failure to exhaust
administrative remedies. The district court granted the motion to dismiss.
On appeal, however, the 6th Circuit found removal to be improper and
reversed the district court. The court did not stop there, addressing the
failure-to-exhaust argument in dicta. As the court explained, although it
did not need to decide that issue, it found the argument unpersuasive
because the heart of the case did not involve the denial of benefits to a
Medicare beneficiary; the only dispute was over payment between the
provider and the health plan.
Prior to these two decisions, district courts and state courts grappled
with the issue of Medicare exhaustion in the context of lawsuits between
providers and MAOs and reached differing conclusions. As these cases play
out in the lower courts, noncontracted providers will need to consider what
steps to take, if any, to administratively appeal MAO payment disputes
before bringing lawsuits.