The DaVita Medicare Secondary Payer (MSP) Cases: What Plans And Their Advisors Need To Know

The DaVita Medicare Secondary Payer (MSP) Cases: What Plans And Their Advisors Need To Know

RENALOGIC U&R IS AN MSP SAFE HARBOR AND AN INDUSTRY LEADER; ALTERNATIVE METHODOLOGIES ARE NOT.

BACKGROUND

Dialysis claims costs are a significant health plan financial exposure, and a profit center for DaVita and Fresenius that control almost 90% of all outpatient dialysis facilities. Therefore, dialysis cost containment is a primary focus of providers’ litigation against plans, most recently by DaVita under the Medicare Secondary Payer Act (MSP).

The MSP coordinates benefits between primary plan payers and Medicare plans as secondary payers for plan members with end-stage renal disease (ESRD). Plan members who have ESRD are entitled to Medicare, but health plans must pay dialysis claims as primary to Medicare for at least 33 months. Plan design, which lets the plan avoid this requirement, violates the MSP.

DaVita filed lawsuits against Marietta Hospital, Amy’s Kitchen, and Virginia Mason health plans, alleging dialysis cost containment methodologies violated the MSP. In these cases, federal appeals court decisions create both high risks and a safe harbor for dialysis cost containment.

WHAT THE MSP CASES SAY

The MSP cases take some in-depth analysis to understand. Here’s a summary of what they are saying:

  • In Marietta Hospital two out of three judges held that a plan that paid 5% of Medicare violated the MSP and most likely “forced” a member with ESRD to change from Medicare. As a result, under ERISA, DaVita can require the plan to pay dialysis claims at rates at least as favorable as any other treatment. DaVita can also sue directly under the MSP for double damages for claims already paid in violation of the MSP. This ruling seriously deviates from existing cases and regulations, and the full court is reconsidering it.
  • Amy’s Kitchen came out after Marietta Hospital and strongly and expressly disagreed in a unanimous Amy’s Kitchen held that a plan using Renalogic’s recommended design, which it quoted at length, did not violate the MSP and could not be sued either directly under the MSP or by the member under ERISA. The decision did not say it in so many words but established that Renalogic’s methodology is an MSP “safe harbor.”
  • Virginia Mason came out along with Amy’s The same judges held that a methodology that paid dialysis at 125% of Medicare for members eligible for Medicare did violate the MSP. DaVita can sue the plan directly for MSP double damages without evidence that Medicare made any payments, which had previously been a requirement for MSP suits. Double damages apply to all claims paid in violation for the three years before an MSP lawsuit.

WHAT THE MSP CASES MEAN TO PLANS

Marietta Hospital and Virginia Mason are likely to open up many plans to MSP violation claims in appeals and litigation and plans should take immediate steps to address this risk.

One clear message from the MSP cases is that the Renalogic design is an MSP safe harbor. Other alternative methods do not provide safe harbors, and some alternative methods are clear MSP violations. Plans should review their dialysis cost containment strategies at once and change their design if it violates or risks violating the MSP because it does not provide a safe harbor.

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Renalogic

Renalogic, headquartered in Phoenix, AZ, was founded in 2002 as a specialty dialysis cost-containment company to help clients understand the unique market dynamics in the dialysis provider community. The company has evolved to become a comprehensive provider of data-driven, end-to-end chronic kidney disease (CKD) care and cost management programs for the self-insured industry. Renalogic’s professional team includes leaders in healthcare administration, care management, legal specialists in ERISA and healthcare law, contract negotiation, payer/provider negotiation, and clinical experts.