This is not a bill: NC District Court addresses ripeness...

Last Updated: 20 Apr 2021

Author: Michelle Allan

Common Medicare Secondary Payer question: When is a Medicare Conditional Payment due? When the mail delivers anything with CMS letterhead prominent in the top left-hand corner, most payers recognize it needs some attention, particularly given the countless horror stories circulated within the insurance industry associated with failure to reimburse CMS.

But there are so many letters. And so many different kinds of letters. There are conditional payment letters (CPLs), and sometimes several of them. There are conditional payment notices (CPNs). Sometimes there are CPNs and CPLs. Then there may be disputes and more CPLs. Finally, there is a Demand for Reimbursement, which may seem as though the end is in sight. But even after reimbursement, there may be more CPNs, CPLs and Demands.

The barrage of various types of correspondence begs the question of when to pay Medicare back before any penalties, collections actions or lawsuits take place. During Medicare’s recent Town Hall held on April 1, questions dealing with this very issue were presented to a joint panel comprised of representatives from CMS, the BCRC and the WCRC. Some timely illumination may also arise from a recent class action dismissal in which the Middle District of North Carolina sheds light on ripeness for payment.

During CMS’s Town Hall conference call last week, there were several questions raised that were pertinent to a recent case out of the Western District of North Carolina that outlines the back and forth that can occur if you attempt to handle Medicare conditional payments prior to a demand being issued.  In Sims v. PMA Insurance Company et al, the District Court dismissed a putative class action alleging failure to reimburse Medicare conditional payments. Certified nursing assistant Cathy Monroe Sims was injured at work on June 16, 2011. She became Medicare entitled on February 1, 2014. Some medical treatment had been denied and on May 15, 2015, the North Carolina Industrial Commission awarded ongoing medical care for her low back. On August 5, 2015, a Rights and Responsibilities letter was issued by CMS. On August 11, 2015, there was a CPL in the amount of $4,552.87, which was disputed and reduced to $2,397.39 by way of another CPL dated September 3, 2015. A third CPL was issued on March 15, 2017 for $6,166.31, which was disputed on February 8, 2018. The dispute was partially favorable, and the amount was reduced to $4,779.73 on March 1, 2018. This amount was disputed on April 6, 2018.

Despite all the back-and-forth correspondence, at no point did any of the letters issued from CMS ask for reimbursement. Rather, the letters said things like “still investigating this case file,” “not a final list and w[ould] be updated,” “This is not a bill,” “Do not send payment at this time,” and “refrain from sending any monies to Medicare prior to … receipt of a demand/recovery calculation letter.”

There had not been any further communication from CMS since the April 6, 2018 suit was filed. Specifically, no Demand had been issued.

Sims filed suit against the insurance company on March 16, 2020.

Once the complaint was filed, a new CPL was issued on April 15, 2020 in the amount of $10,859.34. This amount was disputed on April 23, 2020 and another letter dated May 4, 2020 indicated the dispute was favorable. The conditional payment amount had been adjusted down to zero. 

On June 12, 2020, the Defense filed a 12(b)(6) motion for dismissal for lack of standing and/or failure to properly state a claim. The motion was based on a two-part defense, that Sims lacked standing because she had not suffered an injury in fact and also that the case was not ripe for adjudication.

The next filing was on August 5, 2020, which was an Amended Complaint that not only alleged a violation of the Medicare Secondary Payer act, but also sought class certification.

The Court was tasked with determining whether the Defendant’s failure to reimburse Medicare was final and not dependent on future uncertainties. The Court ultimately agreed with the Defense that whilst CMS and the insurance company were working out the reimbursable conditional payment amount, the matter was not ripe for adjudication because there remained future uncertainties about the amount at issue. Also, failure to reimburse Medicare at this point did not result in any actual harm to Sims. The Court quoted Miller v. Brown, 462, F.3d 319 (4th Cir. 2006) stating “A case is fit for judicial decision when the issues are purely legal and when the action in controversy is final and not dependent on future uncertainties.”

Sims’ position was that the obligation to reimburse Medicare became final after CMS responded to the dispute of February 8, 2018. Specifically, the Court stated, “This correspondence and dispute process, coupled with CMS’s revisions to the conditional payments owed, indicate that Defendants’ failure to reimburse Medicare was not final. Defendants’ requirement to reimburse Medicare remains contingent upon it being determined with appropriate finality that Defendants owe Medicare reimbursement (for example, by CMS issuing a demand recovery letter.)”

There is a footnote at the end of the case that references the factors at play in a private cause of action case, those being the existence of (1) a primary plan, (2) that is responsible to pay for an item or service, and (3) that failed to make the appropriate payment to Medicare for an item or service. Most written judicial opinions focus on whether there is a primary plan and whether the plan has a demonstrated responsibility to pay for items or services. Whether or not the amount is actually due to Medicare is rarely addressed.

Primary payers in workers’ compensation plans have various options in how they can address Medicare Conditional Payments. After the Ongoing Medical Responsibility (ORM) is reported to Medicare through Section 111 reporting, conditional payments can be researched and tallied up as the claim is litigated. Under the Medicare Secondary Payer laws, Medicare has the right to seek reimbursement for any amounts paid conditionally during the course of the claim, up until the time of final settlement when the obligation to pay for medical care concludes by settlement, judgement, award or other payment. One of the complicating factors in settling cases that involve potential Medicare Conditional Payments is that the amount to reimburse can fluctuate as the case progresses, as was the case in Sims. This can occur for myriad reasons, including but not limited to technological functionality, the quality of information conveyed to CMS via Section 111 reporting, changes in relatedness, compensability, coverage, or law, the timeliness of medical providers, suppliers and facilities in submitting bills to Medicare for payment and, of course, the passage of time between various pieces of correspondence, such as the CPLs, CPNs, disputes, determinations, Demands and more.

At the conclusion of a claim, when an ORM is terminated and/or a final settlement agreement is sent to CMS, a Demand will be issued. This is a bill. It will state clearly on the document that it is a Demand for Reimbursement, when the amount is due, what the due amount is, and what the penalty is for failure to make timely payment, which is generally an interest rate hovering around 10%.

Since a conditional payment amount can ebb and flow throughout the claim, a best practice is to review amounts on the portal, wait until about 30-90 days out from settlement to dispute, and then reimburse Medicare when the Final Demand for Reimbursement is received. Otherwise, parties to settlement will find that numerous disputes may be needed as a case progresses, creating waste in terms of time, effort and possible vendor or legal fees to do so. If things do not resolve at the point of Demand, any post-Demand conditional payment controversies can be appealed through the Medicare Hearings and Appeals process from that point forward. Further, payment of a conditional payment amount prior to a Demand can result in accounting misfires; specifically, in that the payment may not be directly applied to the debt at issue.

Medicare Conditional Payments are complex. Allan Koba Compliance Solutions experts have been managing Medicare Conditional Payment programs for nearly two decades. In our role as a Recovery Agent for insurance companies, self-insured businesses, third party administration companies and governmental entities, we efficiently and competently manage the payer’s entire Medicare Conditional Payment program. To discuss how Allan Koba Compliance Solutions can be of service to your business, please contact us at:


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