lien investigation - Solutions for Workers' Compensation and Liability Settlements

14/Jul/2021

On May 12, 2021, the Court of Appeals of Iowa published its opinion number 20-1250 in Forbes v. Benton County Agricultural Society and reminded everyone that in order to avoid surprises that lead to bad settlement results, plaintiffs in liability cases or employers in Workers’ Compensation cases, should always perform a lien investigation into the existence of any lien holders, entities, or plans that could assert a claim for reimbursement of paid claim charges (for this article, all simply referred to as liens). The next steps upon identifying any such liens would be to follow up with lien resolution audit, analysis, and negotiation. While the negotiation of the lien is often finalized after settlement, it is a form of malpractice for an attorney to move to settlement without first inquiring as to whether liens exist.

In August of 2017, Larry Forbes sustained an injury while on the premises of the Benton County Iowa fairgrounds, and hired an attorney to file a negligence action. After initial discovery, counsel for the Benton County Agricultural Society (Ag. Society), made an offer to Forbes’s counsel to settle for $10,000.

The letter referenced TRICARE but not Medicare and stated: “Based on information you have provided to date, Mr. Forbes had an excellent recovery, and his actual medical bills totaled $2,732, for which TRICARE apparently had a subrogation interest.” Burris added: “There is no indication that Mr. Forbes had to pay anything out-of-pocket, or that the medical providers are actually charging anything beyond the $2,732 paid.”

After negotiating, Forbes agreed to settle his suit with the Ag. Society for $12,500. In return, Forbes would dismiss the suit with prejudice. Counsel for the Ag. Society then informed Forbes’ counsel that if Forbes was Medicare eligible, her client would require “final CMS letter, showing the amount owed, if any, in reimbursement to Medicare.” However, after reaching the agreement, Forbes’ attorney learned that Medicare was pursuing a Medicare lien in the amount of $25,482 for reimbursement of conditional payments it made toward Forbes injury related medical expenses. Forbes’ attorney attempted to renegotiate the settlement once the existing Medicare conditional payments came to light. However, the Ag. Society pushed back, insisting Forbes accepted the agreed upon terms of the settlement and was aware of his obligations to Medicare. The Ag. Society moved to enforce the settlement by filing a motion for summary judgment.

When the case went to court, Forbes argued the agreement was unenforceable and claimed there was a “mutual mistake” because the parties failed to reach a “meeting of the minds.” The Iowa District Court for Benton County disagreed with Forbes and ruled in favor of the Ag. Society granting it summary judgment, based on its position that the settlement contract was enforceable. The Court of Appeals of Iowa affirmed the District Court’s ruling, reaching its affirmation under the theory that settlement agreements are essentially contracts and because the District Court properly applied contract law. Furthermore, the Court of Appeals confirmed that the lower court record showed a “meeting of the minds,” and that Forbes therefore, bore the risk of the mistake.

The Court of Appeals provided a detailed analysis on how a party may be considered to bear the risk of a mistake such as when:

“(a) the risk is allocated to him by agreement of the parties, or

(b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or

(c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.”

The court decided that Forbes bears the risk of mistake in two of these exceptions:

“The first of those two exceptions is called “conscious ignorance.” See id. cmt. c. Under that exception, even if Forbes did not agree to bear the risk of mistake, he was aware when he agreed to the settlement that he had limited knowledge about potential Medicare payments. And despite that uncertainty, he “undertook to perform” the bargain. See id. In doing so, he assumed the risk of the mistake. See id. We agree with the district court that Forbes had exclusive access to his medical records and the ability to investigate whether Medicare would seek a recovery claim.

On the second exception, even if Forbes were not consciously ignorant about the possibility of a Medicare recovery claim, the district court was still reasonable in assigning the risk of mistake to him. See Pathology Consultants v. Gratton, 343 N.W.2d 428, 438 (Iowa 1984); see Restatement (Second) of Contracts § 154 cmt. a. As the court noted, Forbes’s fall occurred nearly two years before he sued. In that time, he had the opportunity and the burden to inquire thoroughly into the payment of his medical bills. It made sense for the court to allocate the risk of any mistake to Forbes.”

The full opinion and summary of the case can be read here: https://www.iowacourts.gov/courtcases/12533/embed/CourtAppealsOpinion.

Takeaways

Lien Investigation should be addressed during the pendency of any liability claims to determine who is paying for the injured party to recover from their injury and whether they will be asserting any subrogation/reimbursement right lien. This is especially important for those who are eligible/enrolled in any type of government issued medical insurance plan such as Medicare, Medicaid, VA/TRICARE/CHAMPVA, or who works/worked for a government entity (Such as FELA or FEHBA), or whose health plan is governed by federal law (such as an ERISA plan).

Patience is a virtue, especially in Lien Resolution and Lien Investigation. CMS’ guidelines allow for up to a 45-day response per inquiry. VA/TRICARE/CHAMPVA often take longer. Parties should take this into consideration and be proactive and inquire as to liens early in the case, so that if a settlement opportunity arises, they are able to have an accurate picture of all outstanding liens at the right time. Otherwise, they may be settling prematurely and as Mr. Forbes learned, at their peril.

Neglecting to address liens at the start of settlement is taking an unnecessary risk. Working with an experienced lien resolution group will often produce faster response times and outstanding resolution results. This is due in part to familiarity with the various lien processes, having lien holder contacts on file, use of electronic portals and secure email systems of recovery agents, use of proprietary diagnosis review software. Knowing which remedies may be available when, and how to best use the facts of cases in favor of the injured party when applicable.

Medivest can help you navigate through the complexities of lien resolution while you work toward a desired settlement outcome. Call us to today to speak to one of our highly trained settlement consultants for a free lien case consultation. For more information about Medivest or to refer a case, please call 877.725.2467 | Monday – Friday 8 am to 5 pm EST.

Medivest

02/Jun/2020

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In March 2020, the U.S. Attorney’s Office, as an enforcement arm of the U.S. Department of Justice, filed a lawsuit on behalf of the Department of HHS and its sub agency, CMS, against an attorney in Texas alleging failure of the attorney representing a party injured in a motor vehicle collision to properly reimburse Medicare for conditional payments. The case is U.S. v. Carrigan & Anderson, Case 4:20-cv-00991, Filed 03/18/2020 in U.S. District Court for the Southern District of Texas, Houston Division.

That would not really seem like big news as we have written about several conditional payment enforcement actions by the U.S. Attorney’s Office/Department of Justice over the past few years against plaintiff attorneys for a failure to properly inquire with CMS’s Beneficiary Coordination & Recovery Center (BCRC) contractor and address amounts to be reimbursed to CMS.[1]

However, unlike some of the other cases, the plaintiff attorney in this case took proactive steps attempting to address Medicare’s past interests in the liability settlement. Unfortunately, the steps taken were misguided. Had the attorney requested a compromise or waiver and/or appealed the demand amount by CMS, he would have likely fared better.

Prior to settlement, the attorney properly provided notification of the claim to the BCRC triggering the search by the BCRC for claim related conditional payments. The case settled for $70,000.00 and the plaintiff attorney provided notification of the settlement to the BCRC. Presumably, the plaintiff and attorney had received a copy of an earlier Conditional Payment Letter. Within a few weeks after the settlement notification was provided, the BCRC delivered a demand letter in the amount of $46,244.74, demanding payment within the standard 60 day time period from the date of the demand and informing of the right to appeal its demand amount.

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The attorney creatively filed a motion with a state court in Texas challenging the amount demanded by Medicare and provided notice of same to the BCRC. He called the motion, Motion To Determine Portion of Plaintiff’s Settlement That Constitute Reimbursement of Medical Payments Made in and Regarding Settlement. The court reviewed submitted evidence including an affidavit signed by plaintiff counsel suggesting the claim settled at 1/10^th its full case value, and issued an order reducing the amount to be paid to Medicare by 90% to a figure of $4,700.00. Plaintiff counsel submitted a copy of the order to the BCRC. The full demand amount went unpaid and began accruing interest at nearly 10% APR on the 61^st day post-demand (for current demands, the annual interest percentage rate is now over 10%).

As of March 18th, 2020, when the U.S. filed its recovery action in U.S. District Court, the alleged reimbursement amount had increased to $53,445.93 including interest. The U.S. requested recovery of its fees and costs but interestingly did not request double damages.

The U.S. Attorney’s position is that state courts lack authority to make determinations of federal law including amounts owned to Medicare under the Medicare Secondary Payer Act, 42 U.S.C. Section 1395y(b)(2) (MSP). Furthermore the complaint asserts that because there is an administrative procedure in place under the current MSP regulations, if the plaintiff and attorney disagreed with the demand amount, the administrative appeals process should have been followed, i.e. that there was a failure to exhaust administrative remedies, an express condition precedent to seek redress in U.S. District Court for appeal of Medicare Initial Determinations such as the amount of a demand or a denial of a waiver.

Take Aways

Dispute and Appeal

Review each conditional payment letter to verify each reimbursement claimed is injury related
Dispute all non-injury related claims in a timely manner before the matter settles or before CMS issues its final demand
If unhappy with a CMS reimbursement of conditional payment demand, consider appealing through CMS’s administrative appeals process
You have 120 days to request a first level appeal in writing

In the meantime, consider one of the other post demand dispute processes allowed that may offer your client relief from what you consider to be an unreasonable demand. Depending on the outcome, the appeal may not be necessary.

Compromise Requests

Requesting a compromise to the BCRC offering a sum certain to resolve the claim laying out arguments based in equity similar to the ones made to the state court judge in the case above and/or according to regulations governing compromises by the U.S. Government existing in the CFR
Compromise requests are forwarded by the BCRC to the applicable CMS Regional Office (RO) and a response is provided within 45 days of the BCRC’s receipt of the request
Responses will either be accepted, countered, or rejected

Waivers

If not happy with the response to the compromise request and if the financial condition of the plaintiff is such that they have a hard time meeting their day to day living expenses, a waiver request could be an alternative option
Waiver requests entail filling out a detailed Social Security Administration financial form called the SSA 632-BK
To make its decision, CMS will evaluate resources of the plaintiff, income, the amount of the settlement, outgoing expenses, and hardship factors and may take up to 120 days from start to finish so you need to be mindful of the appeal deadline for the original demand.

[1] January 2020 DOJ US Attorney https://www.medivest.com/philadelphia-based-personal-injury-law-firm-agrees-to-resolve-allegations-of-unpaid-medicare-debts/ Philadelphia plaintiff firm settles for $6,604.59,

Nov 2019 US Attorney General – Baltimore plaintiff firm settles with Medicare for $91,406.98

March 2019 DOJ US Attorney – Maryland plaintiff firm settles with Medicare for $250k

June 2018 DOJ US Attorney – Philadelphia plaintiff firm settles with Medicare for $28k

CLASSIC LIST

The Perils of Failing to Investigate for Medicare and Other Liens

Takeaways

Update on Medicare Conditional Payment Enforcement Actions

Take Aways

Dispute and Appeal

Compromise Requests

Waivers

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