Business Law

DaVita Inc. v. Amy’s Kitchen, Inc., __ F.3d __, 2020 WL 6887338 (9th Cir. Nov. 24, 2020)

Group health plan does not violate the Medicare as Secondary Payer (MSP) provisions when it reimburses dialysis services at the same rate, regardless of underlying diagnosis or Medicare eligibility.

The Medicare as Secondary Payer provisions (MSP), 42 U.S.C. § 1395y(b), dictate who pays first and who pays second when both Medicare and an insurer have independent obligations to pay for a service such as dialysis. Those provisions also forbid plans from taking into account an end-stage renal disease (ESRD) patient’s eligibility for Medicare during the first thirty months of Medicare eligibility. 

Plaintiff DaVita, Inc., provides dialysis treatment to patients with ESRD, including a beneficiary of Amy’s Kitchen’s Employee Benefit Health Plan (Amy’s Plan). DaVita sued Amy’s Plan, alleging that its dialysis payment provisions violate the MSP, ERISA, and state law. The district court dismissed the federal claims and declined to exercise supplemental jurisdiction over the state-law claims. The court rejected DaVita’s MSP claim because the plan reimburses at the same rate for all dialysis services regardless of underlying diagnosis or Medicare eligibility.  DeVita appealed.

The Ninth Circuit affirmed, holding that Amy’s Plan did not violate the MSP because it uniformly reimburses all dialysis treatments. The court explained that the MSP prohibits a plan from taking into account whether an individual is eligible for or enrolled in Medicare and prohibits a plan from “differentiat[ing] in the benefits it provides between individuals having end stage renal disease and other individuals covered by such plan on the basis of the existence of end stage renal disease, the need for renal dialysis, or in any other manner.” Expressly disagreeing with the Sixth Circuit in DaVita, Inc. v. Marietta Mem’l Hosp. Empl. Health Benefit Plan, 978 F.3d 326, 350-51 (6th Cir. 2020), the Ninth Circuit rejected DaVita’s claim that the MSP goes further and bars provisions that have a disproportionate effect, or disparate impact, on persons with ESRD. According to the Ninth Circuit, Congress did not intend to prohibit plans from offering benefits that disproportionately impact persons with ESRD, unless they restrict benefits for treatments that are exclusively for ESRD patients.

The bulletin describing this appellate decision was originally prepared for the California Society for Healthcare Attorneys (CSHA) by H. Thomas Watson and Peder K. Batalden, Horvitz & Levy LLP, and is republished with permission.

For more information regarding this bulletin, please contact H. Thomas Watson, Horvitz & Levy LLP, at 818-995-0800 or htwatson@horvitzlevy.com.

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