U.S. ex rel. Drescher v. Highmark, Inc.

• Decision Date: 20 February 2004
• Docket Number: No. 03-CV-4883.,03-CV-4883.
• Citation: 305 F.Supp.2d 451
• Parties: UNITED STATES OF AMERICA, ex rel. Elizabeth DRESCHER, Plaintiff, v. HIGHMARK, INC., Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

305 F.Supp.2d 451

UNITED STATES OF AMERICA, ex rel. Elizabeth DRESCHER, Plaintiff, v. HIGHMARK, INC., Defendant.

No. 03-CV-4883.

United States District Court, E.D. Pennsylvania.

February 20, 2004.

Mitchell R. Kreindler, Kreindler & Associates, P.C., Houston, TX, for Plaintiff.

Nancy L. Griffin, Patricia D. Gugin, Virginia A. Gibson, U.S. Attorney's Office, Philadelphia, PA, Stanley Alderson, U.S. Department Justice, Washington, DC, for Intervenor Plaintiff.

Andrew J. Soven, Reed Smith, LLP, Philadelphia, PA, Kathleen E. Karelis, W. Jay Devecchio, Miller & Chevalier, Washington DC, W. Thomas McGough, Jr., Reed, Smith, Shaw & McClay, Pittsburgh, PA, for Defendant.

MEMORANDUM AND ORDER

ANITA B. BRODY, District Judge.

I. INTRODUCTION

The United States of America and relator Elizabeth Drescher filed this qui tam action against Highmark, Inc. ("Highmark") for violations of the False Claims Act¹ ("FCA"), 31 U.S.C. § 3729(a)(1), for recovery of Medicare overpayments pursuant to the Medicare Secondary Payer Statute ("MSP"), 42 U.S.C. § 1395y(b)(2)(B)(ii), and for unjust enrichment and breach of contract. Counts I and II are claims against Highmark for violations of the FCA in its capacity as a private insurer and in its capacity as a public insurer, respectively. Count III is a claim against Highmark in its capacity as a private insurer for recovery of Medicare overpayments pursuant to the MSP statute, 42 U.S.C. § 1395y(b)(2)(B)(ii). Count IV is a claim against Highmark in its capacity as a private insurer for unjust enrichment, and Count V is a claim against Highmark in its public capacity for breach of its contract with the Health Care Financing Administration ("HCFA") to perform services as a Medicare Part A fiscal intermediary and as a Medicare Part B carrier.² In addition to the five counts alleged by the United States in its complaint, the relator's personal claims against Highmark for unlawful retaliation pursuant to 31 U.S.C. § 3730(h) also remain.³

Presently before the court are Highmark's motion to dismiss all counts contained in the United States' complaint in intervention and Highmark's motion to dismiss the relator's retaliation claims. For the reasons set forth below, I deny Highmark's motions.

II. BACKGROUND

A. Medicare System

Medicare is a federal insurance program administered by the Department of Health and Human Services ("HHS"), Center for Medicare and Medicaid Services ("CMS"), and established by Congress to pay the costs of health care services provided to individuals who are elderly, disabled, or extremely ill as a result of contracting End-Stage Renal Disease ("ESRD"). 42 U.S.C. §§ 1395 — 1395gg; 42 C.F.R. Part 405 et seq. The Medicare Program is comprised of two parts: Medicare Part A helps pay for inpatient hospital services, nursing home and hospice care, and in some instances home health services; Medicare Part B provides federal government funds to help pay for outpatient hospital services, doctor's visits, certain durable medical equipment and supplies, and, in some instances, home health services. (Compl.¶ 10.)

The United States pays for services provided to Medicare beneficiaries through CMS. (Compl.¶ 11.) CMS, however, does not directly process Medicare claims. Rather, CMS contracts with private companies to handle claims processing responsibilities.⁴ (Compl.¶ 11.) "Fiscal intermediaries" is the term used to refer to private insurance companies that process Medicare Part A and some Part B claims. Private insurance companies that process the bulk of Medicare Part B claims are referred to as "carriers." (Compl.¶ 11.) Pursuant to contracts with CMS, carriers and intermediaries (collectively "contractors") perform claims processing functions, including making determinations whether submitted claims should be paid. (Compl.¶ 12.) When a contractor approves a Medicare claim, the contractor pays the claim with funds from the taxpayer-funded Medicare Trust Fund. (Compl.¶ 12.) In the process of paying a claim with Medicare funds, the contractor must "certify that all payments are in accordance with applicable law and Medicare rules and instructions." (Compl.¶ 12.) Contractors are compensated for performing these functions through administrative payments from the United States. (Compl.¶ 12.)

B. Medicare as Secondary Payer

In certain cases an individual who is otherwise eligible for Medicare coverage also has private group health plan coverage through an Employer Group Health Plan ("EGHP"). (Compl.¶ 13.) Congress endeavored to coordinate the provision of payment in situations in which an individual has overlapping Medicare benefits and private insurance coverage by enacting the MSP statute. Essentially a cost-cutting amendment, "[t]he MSP statute was designed to curb skyrocketing health costs and preserve the fiscal integrity of the Medicare System." Fanning v. United States, 346 F.3d 386, 388 (3d Cir.2003) (citations omitted). The MSP statute and related regulations dictate when Medicare will pay a medical claim as the "primary payer," and when Medicare will pay as the "secondary payer." (Compl.¶ 14.) Because a "secondary payer" is responsible for, at most, that portion of a claim for which the primary payer's coverage did not provide payment, the secondary payer generally pays a smaller portion of a claim than the amount paid by the primary payer. (Compl.¶ 14.)

Generally, under the MSP statute and related regulations, the private insurance carrier is the primary payer.⁵ See, e.g., 42 U.S.C. § 1395y(b)(1)(A), (B); 42 C.F.R. §§ 411.172, 411.101, 411.204. While this is the general rule, two exceptions are made for small employers. Specifically, in the case of working aged beneficiaries (age 65 or older) participating in group health plans sponsored by an employer or employee organization, Medicare becomes the primary payer if the employer has fewer than 20 employees. 42 U.S.C. § 1395y(b)(1)(A)(ii). In the case of employees who are under age 65 and covered under a group health plan, but are entitled to Medicare by virtue of a disability, Medicare will be the primary payer if the employer has fewer than 100 employees. (Compl.¶ 18.)

C. The Life of a Claim

The MSP claims process begins with the provider of health care services. After furnishing services, the provider makes an initial determination whether a claim will be submitted to a private insurance contractor or to a Medicare contractor. (United States' Supp. Br. in Opp'n to Highmark's Mot. to Dismiss [hereinafter U.S. Supp. Br.] at 3.) In this regard, CMS directs providers to ask patients a series of questions designed to elicit whether Medicare or a private insurer is the primary payer. CMS Hospital Manual § 301.2, Part III, "Types of Admission Questions To Ask Medicare Beneficiaries." Likewise, if the provider determines that the claim should be submitted to Medicare, the MSP statute requires that the provider use the information obtained from the individual in order to complete a Medicare claim form. 42 U.S.C. § 1395y(b)(6). If the provider determines that a private insurer should pay as primary, the provider will submit the claim first to the private insurer. (United States' Supp. Br. in Opp'n to Highmark's Mot. to Dismiss [hereinafter U.S. Supp. Br.] at 3.) Upon receipt of the claim, the private insurer makes an independent determination regarding their obligation to pay the claim. Id. at 3-4. While the precise nature of the system used by a private insurer to determine whether to pay or deny a submitted claim, including any criteria or sources of information used, is notably absent from the parties' filings, it is axiomatic that the private insurer must have some mechanism through which these decisions, a routine and integral aspect of their operations, are made. If the private insurer refuses to pay the claim, the denied claim is returned to the provider. (U.S. Supp. Br. at 4.) Thereafter, the provider may submit the claim to a Medicare contractor for payment from the Medicare Trust Fund. (U.S. Supp. Br. at 4.)

III. FACTS⁶

Highmark is a Pennsylvania based corporation and acts both in a private capacity as an insurer and in a public capacity as a Medicare contractor. In its private capacity, Highmark is a private insurance carrier that insures and administers EGHPs.⁷ In its public capacity, Highmark processes claims, performs customer service, and maintains provider relations for the Medicare program pursuant to contracts with CMS. Highmark operates as a Medicare Part A fiscal intermediary through its division Veritus Medicare Services ("Veritus") and as a Medicare Part B carrier through its division HGS Administrators ("HGS"). (Compl.¶ 6.)

While the submissions of the parties are devoid of information concerning the actual process by which Highmark, acting as a private insurer, makes a determination whether to pay or deny a claim and how Highmark obtains the data used to make that determination, the United States' complaint does make allegations through which certain features of Highmark's claims processing system can be inferred. Specifically, the complaint alleges that Highmark's predecessors, Blue Cross of Western Pennsylvania and Pennsylvania Blue Shield, entered into a settlement with the United States in July 1995 concerning allegations of wrongdoing under the MSP statute. (Compl.¶ 28.) The United States further alleges that Highmark is bound by the terms of that settlement which included obligations that the settling plans "review [ ] current data collection efforts and modify existing data collection procedures if necessary to comply with the terms of the settlement agreement," including "the obligation to make a primary/secondary determination with respect to Medicare eligible employees and beneficiaries based on the best available membership data collected." (Compl.¶¶ 30, 31.) The relator, Elizabeth Drescher, is an employee of Highmark who was appointed in July 1996 to the position of project manager...