State News : New York

On 10/5/15, the Centers for Medicare and Medicaid Services (CMS) began implementing a new

process for recovering conditional payments directly from workers’ compensation carriers and selfinsured

employers. CMS is now taking advantage of its ability to recover conditional payments from

primary payers throughout the life of a workers’ compensation claim, not just at times of settlement.

Prior to 10/5/15, the Benefits Coordination and Recovery Center (BCRC) was responsible for

recovering conditional payments from Medicare beneficiaries. Beneficiaries or their representatives

often shared recovery correspondence with primary payers, but the BCRC was not communicating with

primary payers directly in most cases. On 10/5/15 CMS introduced the Commercial Repayment Center

(CRC) which is responsible for recovering conditional payments where the identified debtor is an

insurer or workers’ compensation entity. Recently, the CRC began issuing Conditional Payment Letters

(CPL) and Conditional Payment Notices (CPN) to primary payers. The CRC will send Conditional

Payment Letters and Notices to carriers, Section 111 Responsible Reporting Entities (RREs), Medicare

beneficiaries, Medicare beneficiaries’ attorneys or other representatives. A carrier can also designate a

recovery agent which can be a carrier’s workers’ compensation defense counsel.

Many of our clients have received copies of CPLs or CPNs. At first glance, these letters may

seem daunting, as they contain a myriad of ICD-9 codes and often reference large sums of money.

However, CMS provided a response mechanism along with implementation of the new recovery

process. As a result of the 2012 S.M.A.R.T. Act mandate that CMS develop a formal appeals process

for conditional payment recovery, CMS created a framework for challenging conditional payments. We

recommend taking advantage of that framework in order to minimize conditional payment

reimbursements.

HAMBERGER & WEISS

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SETTING THEIR SIGHTS :

A BRIEF HISTORY OF CONDITIONAL PAYMENT RECOVERY

A conditional payment occurs when Medicare pays a bill for medical treatment which is the

liability of a primary payer. Workers’ compensation is primary to Medicare; therefore, workers’

compensation insurance carriers and self-insured employers are primary payers. Conditional payments

can only be made when a claimant is a Medicare beneficiary. The Medicare Secondary Payer (MSP)

laws allow CMS to recover conditional payments from primary payers.

Historically, conditional payment research was performed when settling a workers’

compensation claim with a claimant who was also a Medicare beneficiary. CMS essentially limited its

recovery efforts to settlements, despite the fact that the MSP laws always allowed for recovery of

conditional payments at any time. In 2009 Medicare, Medicaid, and SCHIP Extension Act

(M.M.S.E.A.) reporting began, requiring primary payers to report the existence of Medicare

beneficiaries on their rolls.1 Medicare was particularly interested in learning of situations where the

primary payer had an ongoing responsibility for medical (ORM). The new conditional payment recovery

process is a direct outgrowth of M.M.S.E.A. reporting.

The S.M.A.R.T. Act was enacted in 2012. One of the provisions of the S.M.A.R.T. Act required

establishment of a formal appeals process for conditional payments. That formal appeals process was

put into place in October 2015. Prior to formalizing the process, the BCRC and its predecessors sought

recovery of conditional payments from Medicare beneficiaries directly.2 As a result, primary payers

were often unaware of the existence of conditional payments until settlement, and even then often relied

on claimants’ attorneys to provide BCRC correspondence which had been received by claimants. The

BCRC did not communicate directly with carriers. When defense counsel researched conditional

payments by contacting the BCRC, we often received responses that incorrectly identified us as

claimants’ attorneys.

Once a primary payer became aware of a conditional payment reimbursement request, the

process to challenge it was somewhat ambiguous. The BCRC did not and still does not have any

obligation to establish causation, nor is it required to provide any medical records or bills in support of a

recovery claim. In addition, it was not and is not obliged to demonstrate primary payer liability for a

claim. Therefore, there could be a conditional payment recovery effort on a disputed workers’

compensation claim. Defenses were certainly available, but there was no formal mechanism for

advancing them. Often, a time consuming process ensued whereby medical authorizations were obtained

from claimants, medical records subpoenaed from providers, and arguments made on issues of causal

relationship, duplicate payments, etc. In the interim, the BCRC would continue to add to the conditional

payment tallies.

1 Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) added mandatory reporting

requirements with respect to Medicare beneficiaries who have coverage under group health plan (GHP) arrangements as

well as for Medicare beneficiaries who receive settlements, judgments, awards or other payment from liability insurance

(including self-insurance), no-fault insurance, or workers’ compensation, collectively referred to as Non-Group Health Plan

(NGHP) or NGHP insurance. Note: Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 is sometimes

referred to as “Section 111”. https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Mandatory-Insurer-

Reporting-For-Non-Group-Health-Plans/Overview.html

2 Recent predecessors of the BCRC include the Coordination of Benefits Recovery Contractor (COBC) and the Medicare

Secondary Payer Recovery Contractor (MSPRC)

HAMBERGER & WEISS

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BULLSEYE – DIRECT RECOVERY FROM CARRIERS & SELF-INSURED EMPLOYERS

The formalization of the conditional payment recovery process in 2015 marked the dawn of a

new era in conditional payment recovery. Perhaps the most significant change is the creation of the

Commercial Repayment Center which focuses its efforts on recovering conditional payments directly

from primary payers, rather than Medicare beneficiaries. The CRC is responsible for seeking recovery

from applicable plans which are identified as Non-Group Health Plans (NGHP), self-insured employers,

No Fault and Workers’ Compensation carriers. The CRC communicates directly with workers’

compensation carriers, defense counsel and agents. A multistep recovery process with 30, 60 and 120

day response deadlines has been implemented, as well as a formal appeal mechanism with specific

permissible and excluded defenses.

Now that a formal process is in place, we recommend that primary payers involve their defense

counsel or agents in the recovery process early on, as early intervention will ultimately reduce the

amount of conditional payments, representing a significant savings for carriers and self-insured

employers.

WHAT TO WATCH FOR – THE NEW RECOVERY PROCESS

Currently, CMS learns that a Medicare beneficiary has a workers’ compensation claim either as a

result of the primary payer reporting the claim through mandatory insurance reporting, or by the

beneficiary’s self-report. Either the MMSEA report or the self-report results in conditional payment

research and a Conditional Payment Letter or Conditional Payment Notice to the primary payer advising

of the results of that research.

If the primary payer reports the claim under mandatory insurance reporting, the CRC will

research whether conditional payments were made from the date of the reported incident to the current

date or date of termination of ORM and issue a Conditional Payment Notice to the primary payer. If the

claimant self-reports, the CRC will perform the same research, but issue a Conditional Payment Letter.

Unfortunately, where the primary payer reports under mandatory insurance reporting and the beneficiary

self-reports on the same workers’ compensation claim, two files are created. This can prove confusing,

as each file will be identified with a different Case Control Number, and the primary payer is

responsible for responding to the file created in response to the mandatory insurance report, rather than

the file created in response to the beneficiary’s self-report.

Challenging a Conditional Payment Letter early on can prove beneficial. Conditional Payment

Letters do not have any deadlines for response, but we recommend responding as soon as possible after

receiving the letter. CMS actually encourages primary payers to advise if there is no ORM or if causal

relationship will be disputed. If CMS agrees with the challenge, subsequent conditional payment

amounts can be reduced. Primary payers can also be proactive and inquire as to the existence of

conditional payments if they have not yet received communication from the BCRC or CRC. Therefore,

we recommend researching conditional payments early and responding to Conditional Payment Letters

promptly so as to mitigate future conditional payment notices and demands.

HAMBERGER & WEISS

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Unlike the Conditional Payment Letter, the Conditional Payment Notice requires a response

within 30 days. If no response is received the recipient is presumed to be identified as the debtor, and

CRC will automatically issue a Conditional Payment Demand within 30 days of the date on the CPN.

Once again, the initial response to the Conditional Payment Notice could challenge causal relationship

or advise that there is no ORM. The majority of challenges we pursued thus far have been on the basis

of causal relationship. The CRC tends to include expenses for treatment of numerous conditions that are

unrelated to the workers’ compensation claim. We find that it is receptive to arguments on causal

relationship and will issue subsequent correspondence reducing the amount of conditional payments.

Once an Initial Determination is made by the recovery contractor, a Conditional Payment

Demand is issued. The primary payer may pay the demand or appeal it.3 In some instances, a portion of

the demand can be paid, while another portion is appealed. If the CRC agreed with challenges to a

Conditional Payment Letter or those received within 30 days of the Conditional Payment Notice, the

successfully challenged conditional payments will not appear in the demand. However, the demand may

include new conditional payments Medicare made after the CPL or CPN was issued.4 If paying the

demand, or the undisputed portion of the demand, payment must be made within 60 days of the date of

the demand letter. Unpaid portions of the demand will be referred to the Department of the Treasury and

interest will accrue.

If the primary payer chooses to appeal the demand, the appeal must be filed within 120 days of

receipt of the Conditional Payment Demand.5 Receipt is presumed to be within five calendar days of the

date on the demand letter, absent evidence to the contrary. If the primary payer appeals the demand,

there will not be a referral to the Department of the Treasury while the appeal is being processed, but

interest will accrue. Therefore, we recommend that the primary payer pay the portion of the demand that

it agrees with pending the outcome of an appeal, so as to avoid interest on that portion. Should the

primary payer elect to pay the full amount of the demand pending appeal, a refund of the disputed

portion of the demand will be issued to the primary payer if the appeal is successful.

Appeals must be written. Only the primary payer is a party to the appeal, meaning the Medicare

beneficiary does not have appeal rights. Permissible defenses include causal relationship and that the

alleged debt should not exist. Other defenses are specifically excluded. For example, the primary payer

cannot argue that it already paid a requested charge to a beneficiary or another party. A primary payer

cannot assert a waiver of recovery which is an option only available to Medicare beneficiaries.

Applicable plans cannot argue for a pro-rata reduction of recovery based upon attorney fees.

3 There is no appeal process for demand letters issued before 4/28/15. If a primary payer wishes to dispute a demand that

pre-dates 4/28/15, it will deal directly with the CMS contractor which issued the demand.

4 CRC’s conditional payment research is ongoing until CMS Is made aware that ORM is terminated. The S.M.A.R.T. Act

provides a three year statute of limitations on recovery of conditional payments, meaning that CMS has three years from

the date it is notified of a settlement, judgment, award or other payment to seek recovery. However, medical providers

have one calendar year from a date of service to bill Medicare. There are several exceptions to the one year time limit

including retroactive Medicare entitlement which is often the case with claimants who are awarded Social Security

Disability benefits.

5 Conditional Payment Demand Letters issued from 4/28/15 forward can be appealed. CPDs dated prior to 4/28/15 are not

subject to the formal appeals process, but can be responded to and challenged through correspondence with the issuing

entity.

HAMBERGER & WEISS

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The appeal process has several levels. The first step, Redetermination, is decided by the recovery

contractor who issued the Initial Determination. Following Redetermination, the process is taken out of

the hands of the original contractor and addressed for Reconsideration by a CMS Qualified Independent

Contractor. Following Reconsideration, a dissatisfied party may request a hearing before an

Administrative Law Judge.6 If the Administrative Law Judge’s decision is unsatisfactory, a party may

request review by the Medicare Appeals Council. Finally, if the Medicare Appeals Council does not

issue a decision, dismissal or remand to the Administrative Law Judge within a specified period of time,

the appellant can request escalation to Federal District Court. However, a dismissal by an Administrative

Law Judge cannot be escalated.

PROTECT YOURSELF - DEFENSE RECOMMENDATIONS

The best way to resolve conditional payments in primary payers’ favor is to be proactive.

Identifying Medicare beneficiaries who are also workers’ compensation claimants early in the claims

process and researching conditional payments well before settlement can significantly mitigate liability

throughout the life of a claim and at the time of settlement. In addition, there are certain situations, such

as WAMO settlements and disputed claims, where the savvy claims handler can identify the risk of

outstanding conditional payments and reduce liability by researching and disputing conditional

payments.

Once conditional payments are identified, early responses to Conditional Payment Letters and

Conditional Payment Notices are effective ways to limit conditional payments throughout the life of a

workers’ compensation claim. Theoretically, the sooner that the BCRC is aware of the existence of a

primary payer, the less likely it is that Medicare will continue to make conditional payments on a claim.

There are various ways to respond to the BCRC and CRC. CMS established internet access through the

Medicare Secondary Payer Recovery Portal (MSPRP) and a limited CRC portal both of which we can

access. Written responses are also accepted and have proven expeditious thus far. The primary payer, its

defense counsel, or agent can research conditional payments, respond to CPLs and CPNs and appeal

demands. As attorneys for carriers and self-insured employers, we have been researching conditional

payments and responding to the BCRC and CRC for our clients using both the MSPRP and written

responses with success.

We look forward to assisting you in researching conditional payments and responding to BCRC

and CRC recovery efforts. Please feel free to contact us with any questions on conditional payment

recovery generally or for legal assistance on a case by case basis. Attorney Nicole Graci can be reached

at (716) 852-5200 x301 or ngraci@hwcomp.com.