HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Monday, January 3, 2005

5th Cir.: M+C Claims by Contracted Providers Not Subject to Exhaustion Requirement

After a series of District Court opinions to the contrary, the Fifth Circuit has restored sanity to the law of Medicare+Choice (renamed "Medicare Advantage") litigation.  Here's the type of problem addressed by the Rencare decision, handed down Dec. 31:

Hospitals contracted with managed care organizations (MCO) to provide discounted services to Medicare beneficiaries who selected the M+C option.  The hospitals provided various services and claimed they were either paid late or not at all by the MCOs, which had already received their payments from the Medicare program.  The hospitals sued in state court for breach of contract and/or breach of the prompt-pay statute (if any) in their state.  The MCO removed to federal court (on the theory that these are, at bottom, payment disputes that arise under the Medicare statute) and then moved to dismiss because the hospitals haven't exhausted their administrative remedy with CMS.  A number of district courts have been seduced by this argument and have granted the motion to dismiss.

The Fifth Circuit's short and unanimous opinion deftly brushes aside the exhaustion argument, primarily on the ground that there is no administrative remedy to exhaust when you are a contracted provider trying to get paid for services already approved by CMS and for which the government has already paid the MCO.  The court is especially solid in distinguishing the Supreme Court's Ringer decision (in which the Court upheld the exhaustion requirement based upon its observation that a challenge to HCFA's coverage decision was "inextricably intertwined" with straight-up Medicare reimbursement claims, which were unarguably subject to the exhaustion requirement).  Lots of courts have misread Ringer and applied it to situations to which it doesn't apply, and the 5th Circuit in Rencare has finally put Ringer in its place.

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