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Humana Lawsuit Update

TO:                 OSCA Membership
FROM:           Brennan, Manna & Diamond, LLC
DATE:            May 19, 2015
RE:                 Humana Lawsuit


On September 17, 2014, the Ohio State Chiropractic Association (“OSCA”) and Thaddeus C. Bosman, D.C., Inc. (“Dr. Bosman”) filed a putative class action lawsuit against the national insurance company Humana, alleging claims of unjust enrichment and breach of implied contract based on Humana’s recoupment of alleged “overpayments” made to non-contracted Ohio chiropractors providing care to Humana’s Medicare Advantage Plan enrollees. The suit also seeks a declaratory judgment and injunction prohibiting Humana from “recouping” alleged “overpayments” pending a decision on the merits of OSCA’s claims.


On October 16, 2014, Humana removed the case to the United States District Court for the Northern District of Ohio. Following removal to federal court, Humana argued that the case “arose under” the Medicare Act and should be dismissed for failure to exhaust the Medicare Act’s mandatory administrative remedies.


The crux of OSCA’s argument in response was that this case is a private payment dispute between Humana and Ohio chiropractors in which neither the federal government nor any Medicare enrollees have any financial interest. This is because Medicare Advantage Organizations (“MAOs”) like Humana receive capitated payments from the federal government at established rates, and bear 100% of the risk for allocating these payments among their providers – therefore, no federal funds are at risk in MAO/provider payment disputes arising under Medicare Part C. Accordingly, this case does not “arise under” the Medicare Act and exhaustion of the Act’s administrative remedies is not required.


Ultimately, the district court dismissed the case for failure to exhaust administrative remedies under the Medicare Act. OSCA timely filed an appeal from this ruling, which we believe is erroneous on multiple grounds.


Specifically, other courts have previously agreed with OSCA’s argument that Medicare Part C provider payment disputes do not “arise under” the Medicare Act and that federal preemption and exhaustion requirements do not apply to those disputes. This is because the federal government is insulated from any financial risk and individual Medicare beneficiaries are in no danger of being denied benefits. See Rencare, Ltd. v. Humana Health Plan of Tex., Inc., 395 F.3d 555 (5th Cir.2004) (payment disputes between Part C providers and MAOs do not “arise under” the Medicare Act and do not trigger Medicare administrative exhaustion requirements); Christus Health Gulf Coast v. Aetna, Inc., 237 S.W.3d 338 (Tex. 2007) (same); Canandaigua Emergency Squad, Inc. v. Rochester Area HMO, Inc., 780 F.Supp.2d 313 (W.D.N.Y. 2001) (Part C providers’ lawsuit to redress MAO’s recoupment of “overpayments” made above the Medicare fee schedule rate arose under state law and did not require exhausting Medicare administrative remedies).


We believe these cases provide good grounds for challenging the district court’s ruling. At present, our appeal is pending before the United States Court of Appeals for the Sixth Circuit in Cincinnati, Ohio. OSCA and Dr. Bosman filed their brief with the Court on March 30, and Humana’s brief in response is due May 22. Thereafter, OSCA and Dr. Bosman will have 17 days to file a reply brief in response to Humana’s arguments. A copy of OSCA’s brief is enclosed with this update.


Following the completion of briefing, we expect the Court to schedule oral arguments on this matter. Oral arguments may not be scheduled until late summer or early fall, and thereafter a decision may not be reached for several months. While we understand that Humana has continued to recoup alleged overpayments during the pendency of this lawsuit, there is nothing we can do to stop them until the Court makes a decision and hopefully reinstates our case at the trial level. If we are successful on appeal, we will continue with the lawsuit and ask the Court to enjoin Humana from further recoupment and order it to return all funds that have previously been recouped from Ohio chiropractors.


Although the case is currently “in limbo” while on appeal, we appreciate your continued updates on Humana’s recoupment practices. Provided that our appellate arguments are successful, we can use this evidence to bolster our case in the event it proceeds to trial. If you have any questions or concerns about Humana’s recoupment practices or OSCA’s legal action to protect Ohio chiropractors, do not hesitate to contact the OSCA or legal counsel directly.


DOCUMENT - Brief of Appellants

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