Ninth Circuit Rejects Dialysis Provider's Challenge to Plan's Reimbursement Provisions Under Medicare Secondary Payer Rules and ERISA | Practical Law

Ninth Circuit Rejects Dialysis Provider's Challenge to Plan's Reimbursement Provisions Under Medicare Secondary Payer Rules and ERISA | Practical Law

In a dispute involving health provider reimbursement rates for dialysis treatment for end-stage renal disease (ESRD), the Ninth Circuit held that a group health plan's reimbursement provisions did not violate the Medicare Secondary Payer (MSP) rules.

Ninth Circuit Rejects Dialysis Provider's Challenge to Plan's Reimbursement Provisions Under Medicare Secondary Payer Rules and ERISA

by Practical Law Employee Benefits & Executive Compensation
Published on 30 Nov 2020 • USA (National/Federal)
In a dispute involving health provider reimbursement rates for dialysis treatment for end-stage renal disease (ESRD), the Ninth Circuit held that a group health plan's reimbursement provisions did not violate the Medicare Secondary Payer (MSP) rules.
In a dispute involving health provider reimbursement rates for dialysis treatment for end-stage renal disease (ESRD), the Ninth Circuit held that an employer-sponsored group health plan's reimbursement provisions did not violate the Medicare Secondary Payer (MSP) rules (DaVita Inc. v. Amy's Kitchen, Inc., (9th Cir. Nov. 24, 2020)).

Health Plan Adds Program to Manage Dialysis Treatment Benefits

The plaintiff in this case is a dialysis treatment provider. During 2016, a health plan beneficiary began receiving dialysis treatment from the provider for end-stage renal disease (ESRD). Under the plan, provider reimbursement rates depended on whether the provider was in-network or out-of-network. As an in-network provider, the provider received reimbursement from the plan at the in-network contractual rate.
In 2017, the plan adopted a "Dialysis Benefit Preservation Program," which modified its coverage of dialysis treatments to address perceived price inflation by dialysis providers. Under this program, the plan:
  • Eliminated the in-network/out-of-network distinction for dialysis treatment reimbursements.
  • Subjected all dialysis-related claims to cost review by the plan administrator and directed the plan administrator to determine the "usual and reasonable charge" based on average payments for comparable services.
These changes resulted in the provider being reimbursed less for its services.
The provider sued the plan, asserting violations of the MSP provisions and ERISA (see Practice Note, ERISA Litigation: Causes of Action and Remedies Under ERISA Section 502 for Benefit and Fiduciary Breach Claims and ERISA Litigation Toolkit). The district court dismissed, and the provider appealed.

Ninth Circuit Affirms Dismissal of Claims

On appeal, the Ninth Circuit affirmed, concluding that:

Plan Did Not Violate MSP Rules

Under the MSP statute, as applicable to ESRD, a group health plan cannot:
  • Take into account that an individual is entitled to or eligible for Medicare benefits because of ESRD during the first 30 months of the Medicare eligibility period.
  • Differentiate in the benefits it provides between individuals having ESRD and others covered under the plan based on the existence of ESRD, the need for renal dialysis, or in any other manner.
(42 U.S.C. § 1395y(b)(1)(C); see Standard Clause, SPD Language, Coordination of Benefits: Drafting Note: Medicare COB Rules for Individuals with End Stage Renal Disease.)

Plan Did Not Take into Account Beneficiary's Medicare Eligibility

Regarding the first MSP requirement, the Ninth Circuit held that the plan did not impermissibly take into account the beneficiary's eligibility for or enrollment in Medicare. According to the court, the plan:
  • Provided the same reimbursement for all dialysis treatment regardless of whether a claimant was eligible for or enrolled in Medicare.
  • Did not distinguish between the first three months of dialysis treatment for ESRD or acute kidney injury, neither of which is eligible for Medicare, or dialysis treatment for ESRD after three months, which is eligible for Medicare.

Plan Did Not Differentiate in Benefits for Individuals with ESRD

The Ninth Circuit also concluded that the plan did not differentiate in benefits it provided for individuals with ESRD relative to those without ESRD. Instead, it provided the same dialysis benefits to all covered participants and beneficiaries.
The provider argued that the plan provision had a disparate impact on individuals with ESRD. In analyzing whether the MSP includes a disparate-impact theory, the Ninth Circuit looked to a Sixth Circuit decision (see DaVita, Inc. v. Marietta Mem'l Hosp. Empl. Health Benefit Plan, 978 F.3d 326 (6th Cir. 2020)). In Marietta, the Sixth Circuit applied the Supreme Court's analysis in Texas Department of Housing & Community Affairs v. Inclusive Communities Project, Inc. (576 U.S. 519 (2015)), which involved the Fair Housing Act (FHA), to conclude that the MSP encompasses a disparate-impact theory. The Ninth Circuit disagreed with the Sixth Circuit's analysis and rejected the provider's disparate-impact theory under the MSP. In reaching this conclusion, the Ninth Circuit reasoned:
  • Congress's choice to use "differentiate" instead of "discriminate" in the MSP indicated that it did not intend for the MSP to permit disparate-impact claims.
  • There was no evidence that Congress "acquisced in a disparate-impact theory that has been widely adopted by the federal courts."
  • Unlike the FHA and other federal anti-discrimination statutes, the MSP was not intended to remedy historical or societal injustice.
  • A disparate-impact theory did not find support in the MSP's implementing regulations.

Dismissal of ERISA Claims Was Warranted

The provider also brought an ERISA claim for benefits and equitable relief (see Practice Note, ERISA Litigation: Causes of Action and Remedies Under ERISA Section 502 for Benefit and Fiduciary Breach Claims: Claims for Benefits Under Plan Terms (ERISA Section 502(a)(1)(B)) and Claims for Appropriate Equitable Relief (Catchall Provision) (ERISA Section 502(a)(3))).
The Ninth Circuit dismissed the provider's claims, concluding that:
  • The provider's claim for benefits, which it brought as the beneficiary's assignee, was based on the alleged MSP violation.
  • The provider could not bring a claim for equitable relief under ERISA because the assignment form did not include an assignment of equitable claims.
(See Standard Document, SPD Language, Anti-Assignment Provision (Health Plan).)

Other Recent Case Involving Reimbursement Under MSP Rules

In another recent case involving the MSP rules and reimbursement for dialysis for ESRD, the Ninth Circuit held that payment by Medicare is not a prerequisite for bringing a private cause of action under the MSP rules (DaVita Inc. v. Virginia Mason Mem'l Hosp., (9th Cir. Nov. 24, 2020)).

Practical Impact

In analyzing the MSP claims at issue in this case, the Ninth Circuit emphasized that both individuals with ESRD and acute kidney injury are common recipients of dialysis. The court went on to observe that a recent study has concluded that individuals who were hospitalized with COVID-19, the disease that results from SARS-CoV-2, are at significant risk of acute kidney injury. As a result, the ongoing COVID-19 pandemic may eventually focus greater attention on plan provisions governing coverage of kidney dialysis—and perhaps result in additional challenges to these provisions under the MSP rules, ERISA, and state laws. (For more information, see Practice Note, COVID-19 Compliance for Health and Welfare Plans.)