Over the years, we’ve been confronted with glaring headlines involving lawsuits that appear ridiculous. At times however, the plaintiffs may produce sufficient evidence to support their claims, as in the McDonald’s third degree burns from hot coffee litigation. In the McDonald’s case, the plaintiff was able to show that even though coffee is supposed to be hot, the temperature of the McDonald’s coffee was scalding and hotter than the coffee served at most restaurants. (Liebeck v McDonalds , 1994 Extra LEXIS 23 ( Bernalillo County, N.M. Dist.Ct 1994), 1995 WL 360309 (Bernalillo County, N.M. Dist. Ct. 1994) Contrast this with the lawsuit that was filed against Anheuser-Busch for false advertising. Here the plaintiff claimed emotional and psychological distress from the absence of beautiful women on a beach when he drank Bud Light beer. (Overton v Anheuser-Busch Company, 205 MIch.App. 259 (1994), 517 N.W.2d 308) This case was dismissed.
It is clear that frivolous pleadings and bad faith actions result in lawsuit abuse. The defense of the actions takes up valuable resources and requires the payment of fees to defend the actions. State laws oftentime provide a remedy by allowing a party to seek sanctions against the party that filed the frivolous lawsuit. If the sanctions are awarded by the court, the plaintiff may be required to pay the reasonable attorney fees that were spent in connection with the defense of the frivolous lawsuit.
In Illinois, sanctions may be awarded under Illinois Supreme Court Rule 137. The Rule addresses two main situations where sanctions may be appropriate. The first situation involves “pleadings not well grounded in fact or unwarranted by existing law.” This determination applies the “objective reasonableness test” that considers the circumstances at the time of the filing. The second situation involves “pleadings interposed for an improper purpose.” In this situation, courts will look for evidence of bad faith based on the motivation behind the filing.
Frivolous claims are not limited to the court system. Concerns about frivolous bid protests involving defense procurements prompted the Committee on Armed Services to task the U. S. Governmental Accountability Office (GAO) to report on trends in bid protests related to the Department of Defense procurements. The April 9, 2009 report to Congress described the assignment as a request “…that we assess the extent to which bid protests may be increasing, the extent to which frivolous and improper protests may be increasing and the causes of any identified increases. The committee further directed the Comptroller General to provide recommendations regarding actions that Congress, or the executive branch, could take to disincentivize frivolous and improper bid protests on the part of the industry.”
So what does any of this have to do with CMS and the Medicare Secondary Payer Act? Over the past few months, we’ve noticed an increase in frivolous conditional payment reimbursement claims from the Benefits Coordination and Recovery Center (BCRC) and the Commercial Repayment Center (CRC). In order to understand the “frivolous” nature of these claims, a review of the Medicare Secondary Payer Act is appropriate.
42 U.S.C. Section 1395y(b)(2)(A) specifically prohibits Medicare from making a payment for any item or service “to the extent that … payment has been made or can reasonably be expected to be made under a workmen’s compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance.” The exception to this prohibition is found in subparagraph (B) which states that Medicare may make payment if the primary plan described above “has not made or cannot reasonably be expected to make payment with respect to such item or service promptly…” Medicare’s payment is conditioned on reimbursement to the appropriate Medicare Trust Fund. Section 111 mandatory reporting obligations, found at 42 U.S.C. 1395y(b)(8), enhance Medicare’s ability to identify Medicare beneficiaries that have received settlements, judgments, awards or other payments from workers’ compensation, no fault insurance or liability insurance plans. By virtue of this reporting, Medicare is then able to seek recovery of conditional payments from a primary plan and avoid making additional payments when a primary plan is available. Failure to respond to a conditional payment determination may result in interest and double damages stemming from a Treasury collection action.
Conditional payment letters and the corresponding Payment Summary Form will reflect the diagnosis code(s) that pertains to the condition(s) claimed in the workers’ compensation claim. The BCRC will usually obtain the diagnosis code either through a beneficiary self-report or through Section 111 reporting. The BCRC and CRC will then conduct a data sweep to identify payments that have been made by Medicare that correspond with the reported diagnosis code. The use of ICD-10 diagnosis codes in the reporting provides greater specificity in identifying the conditions related to the underlying workers’ compensation injury and the medical conditions treated by a provider.
We recently received numerous conditional payment letters from the BCRC and CRC seeking reimbursement for services that have absolutely no relationship to the conditions reported nor are incidental to the conditions claimed in the underlying workers’ compensation case. One of the more absurd conditional payment letters sought reimbursement for mammograms, treatment to dog bites to the ankle, and hypertension in a workers’ compensation claim that only alleged a lumbar disc herniation. Although these claims are being disputed, the fact that they are being claimed without any factual basis is troubling. By issuing conditional payment letters that have no basis in fact and lack any support in existing law, the BCRC and CRC are forcing parties to spend their time and resources to dispute the frivolous claims. This practice, coupled with the BCRCs and CRCs oftentimes cursory review of disputes, has a “chilling effect” on the parties’ right to dispute conditional payments. Parties may at times choose to simply reimburse the Medicare Trust Fund for the unfounded “conditional payment” rather than spend the time to go through the dispute process. This is an abuse of the conditional payment process.
If the CRC and BCRC are again plagued by a dysfunction in their Grouper system (recall 2016), the problem must be rectified. While it is being solved, an additional level of quality review should be provided before making these frivolous conditional payment claims. Given these frivolous claims, the CRC and BCRC must also provide a more meaningful review of the conditional payment disputes in the claims. The ability of the CRC/ BCRC to push these types of unfounded claims through their appeal process, without providing any recourse to the primary payer for having to defend these frivolous claims, is inherently unjust. Wouldn’t it be nice if we could get sanctions?