Business Law

DaVita Inc. v. Virginia Mason Mem’l Hosp., __ F.3d __, 2020 WL 6887341 (9th Cir. Nov. 24, 2020)

Payment by Medicare is not a prerequisite for suing to enforce the Medicare as Secondary Payer (MPS) provisions.

Persons with end-stage renal disease (ESRD) become eligible for Medicare after three months of dialysis treatment, even if not otherwise eligible for Medicare. The Medicare as Secondary Payer provision (MSP), 42 U.S.C. § 1395y(b), dictates who pays first and who pays second when both Medicare and an insurer have independent obligations to pay for a service such as dialysis. The MSP also imposes certain requirements on group health plans, such as forbidding plans from taking into account an ESRD patient’s eligibility for Medicare during the first thirty months of Medicare eligibility.

Defendant Virginia Mason Memorial Hospital administers its own group health plan that authorizes payment to providers of dialysis. Plaintiff DaVita, Inc., provides dialysis treatment to patients, including a beneficiary of Virginia Mason’s group health plan with ESRD. DaVita sued the Virginia Mason Plan under the MSP’s private cause of action provision, alleging that it failed to make statutorily compliant primary payments because it reduced payments as soon as patients became eligible for Medicare without waiting the mandatory thirty months. However, because the reduced payments were more than the Medicare rate, Medicare never made any secondary payments. The district court dismissed the complaint, holding that a private cause of action is available only when Medicare has made a payment.  DaVita appealed.

The Ninth Circuit reversed. Expressly disagreeing with two Sixth Circuit decisions, DaVita, Inc. v. Marietta Mem’l Hosp. Empl. Health Benefit Plan, 978 F.3d 326, 337-40 (6th Cir. 2020), and Bio-Medical Applications v. Tenn., Inc. v. Central States Se. & Sw. Areas Health & Welfare Fund, 656 F.3d 277, 278 (6th Cir. 2011), the Ninth Circuit held “that Congress did not intend payment by Medicare to be a prerequisite to bringing a private cause of action under the MSP.” Thus, an MSP claim is available when a primary plan impermissibly takes Medicare eligibility into account too soon, even if Medicare has not made payments.  The Ninth Circuit explained that the private right of action attaches if a plan either fails to pay the same for Medicare enrollees or fails to pay first when required to do so.  The plan need not fail on both scores; a noncompliant payment, for either reason, triggers the right to sue. 

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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