Appeals court affirms hospital liens are enforceable after Medicare billing period expires

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By James Nicodemus

A recent decision from the Wisconsin Court of Appeals affirmed that the University of Wisconsin Hospital could pursue a hospital lien against a Medicare-eligible patient even after the Medicare billing period had expired.

Plaintiff Conrad Laska had claimed that a 2000 U.S. Dept. of Health and Human Services memorandum directed the hospital to reach settlement of a lien within the one-year Medicare billing period, or drop its lien.

But in deciding Conrad Laska v. General Casualty Co. of Wisconsin et al. on March 14, the appellate court found for the hospital, deciding that the 2000 memorandum was an incorrect statement of Medicare law.

“It undermines the cost-shifting purpose of the Secondary Payer Statute,” the appellate court said. “If followed, the 2000 memorandum would encourage providers to pursue Medicare over other sources of payment.”

Although the federal “Provider Agreement Statute” does say that a provider hospital in the program cannot charge a Medicare-eligible patient for services which would be covered by Medicare, the appellate court found the language had to be interpreted to coexist with the “Secondary Payer Statute,” which allows a hospital to seek payment from an insurance company through a lien without requesting Medicare reimbursement.

Case history

Conrad Laska was in an automobile/moped accident on May 28, 2007. After the accident, several of his medical providers sought payment through Medicare.

One of Laska’s medical providers, the University of Wisconsin Hospital, never submitted billing to Medicare for $19,423.26 in money owed, but instead filed a Wisc. Stat. 779.80 hospital lien, in part relying on the 42 U.S.C. 1395 y(b) federal Secondary Payer Statute. The federal statute makes Medicare “a secondary payer for medical services to a Medicare-eligible patient when payment can be made through other insurance…, such as automobile or general liability insurance.”

Laska filed suit in Dane County in September 2008, joining the University of Wisconsin Hospital in the litigation. The Medicare billing date expired Dec. 31, 2008, a year after the last date Laska was treated.

After Laska settled with the last defendant in early 2009, he filed for summary judgment against the hospital, claiming that the 2000 memo was HHS’s “current position” on the matter, which required the hospital to drop its lien after the Medicare billing date expired.

Dane County Circuit Judge John Albert granted summary judgment to the hospital and Laska appealed, renewing his request that the appellate court find that the 2000 memorandum should be respected and recognized as existing HHS policy.

The 2000 memorandum is based on 42 U.S.C. Sect. 1395cc, otherwise known as the “Provider Agreement Statute,” which states that healthcare providers in the program may “not … charge … any individual or any person for … services for which such individual is entitled to have payments made under [Medicare].” Specifically, the 2000 HHS memorandum says that a provider must drop its lien and terminate all billing efforts to collect from a liability insurer or a beneficiary under the interpretation, unless the claim was “paid or settled prior to the Medicare billing period expiration date.”

The hospital responded that the 2000 Memorandum is an “incorrect” interpretation of federal law, in part asserting that the Secondary Payer Statute was a better embodiment of true legislative intent. The Secondary Payer Statute makes Medicare a secondary payer for medical services, when payment can be made through other primary insurance plans such as automobile and liability insurance policies.

The appeal

The appellate court rejected Laska’s reliance on the 2000 memorandum, agreeing with the hospital and circuit court that his interpretation was inconsistent with the legislature’s efforts to shift Medicare costs from the government to responsible third party tortfeasors and their insurance companies.

When the Secondary Payer statute was enacted in 1980, it was, in part, created to reduce the cost of Medicare by shifting fees to other parties, according to the court.

Laska’s interpretation of the 2000 memorandum would cause the unusual result of a Medicare beneficiary only being entitled to Medicare payments after the medical billing period expired, which the court characterized as “odd.”

The appellate court relied upon two earlier federal court cases to suggest that Laska’s position was out of step with existing law: Oregon Association of Hospitals, 708 F.Supp. 1135 (1989), and American Hospital Association v. Sullivan, 1990 WL 274639. In both Oregon and American Hospital, HHS tried to use the Provider Agreement Statute as a basis to limit the ability of providers to pursue payment from liability insurers. In both cases, the courts rejected the HHS position.

The appeals court explained that although HHS Memoranda are viewed as a window into the department’s opinions on of Medicare law, they have “no force of law and warrant no judicial deference.”

Laska recognized that HHS memorandum are not binding, but asserted that the 2000 memorandum represented the agency’s “current position” on when and whether a provider can maintain a lien against a patient tort claim. But the court found no merit in Laska’s proposition that the court should abide by the 2000 memorandum just because it may have been the only department document to directly deal with the lien issue.

“This fails to account for situations where an agency interpretation is plainly contrary to enacted laws,” the court said, “or just unreasonable.”

The court also discounted Laska’s effort to suggest that the Wisconsin Supreme Court’s recently issued decision in Gister v. American Family Insurance Co., had no impact on his reliance on Dorr v. Sacred Heart Hospital, 228 Wis. 2d 425 (1999).

In Dorr, the court found that the hospital could not pursue their lien against a Medicare-eligible patient who had an HMO because there was no underlying debt to pursue directly from the patient. The Gister court limited the scope of Dorr to cases involving HMOs, which undercut Laska’s ability to rely on the facts of Dorr, the appeals court said.

“In either the Medicare or Medicaid context,” concluded the court, “the provider is free to either bill to the government payer, or to hold out and take its chances for a greater recovery from the negligent third-party liability insurance carrier.”