Tenet Healthsystem GB, Inc. v. Care Improvement Plus South Cent. Ins. Co.

Tenet Healthsystem GB, Inc. v. Care Improvement Plus South Cent. Ins. Co.

Opinion

 [*586]  WALKER, Circuit Judge:

Plaintiffs-appellants are eleven hospitals (the "Plaintiff Hospitals" or "the Hospitals") who provided medical care to Medicare Part C enrollees after being authorized to do so by the defendant-appellee, Care Improvement Plus ("CIP"). BB [**2]  4-5. CIP is a Medicare Advantage Organization ("MAO"), which is a private insurance company that manages the Medicare benefits of Part C enrollees. CIP initially reimbursed the Hospitals in full, but several years later it recouped a substantial portion of these payments through offsets, claiming they were not authorized under Part C of the Medicare Act (the "Act"), 42 U.S.C. §§ 1395w-21 to 1395w-29. The Hospitals then filed this lawsuit to recover the recoupments. The district court dismissed the claims for lack of jurisdiction, holding that the Hospitals failed to exhaust their administrative remedies before bringing suit in federal court.

This case requires us to determine whether under the Medicare Act the Plaintiff Hospitals must exhaust their administrative remedies before bringing suit for underpayment by the MAO that manages enrollee benefits. To decide this case it is necessary to understand the relationship of the parties within the statutory context of the pertinent provisions of the Medicare Act.

] Under Medicare Part C, Pub. L. No. 105-33, § 4001, 111 Stat. 251 (1997) (codified as amended at 42 U.S.C. §§ 1395w-21 to 1395w-29), MAOs, which are private sector insurers, contract with the Centers for Medicare and Medicaid Services ("CMS"), the branch of the United States Department of Health [**3]  and Human Services ("HHS") responsible for administering Medicare, to provide medical treatment to Medicare enrollees. CMS pays MAOs a pre-negotiated lump sum for one year (known as a "capitated payment") for each enrollee that the MAO agrees to cover. In exchange, the MAO assumes all of the financial risk for treating that enrollee. See 42 U.S.C. §§ 1395w-24-25; see also RB 4; BB 5. If the cost of treatment exceeds the amount that the MAO was paid, the federal government is not liable for the cost overruns—the MAO bears the loss. Appx. F at *2. Under Medicare Part C, MAOs provide the same benefits that an enrollee would receive through the traditional, government-administered, fee-for-service programs under Medicare Parts A and B, as well as additional benefits. Appx. F at *2.

] As the organizations responsible for administering benefits, MAOs make determinations as to whether a certain type of treatment is covered under the Medicare regulations, and if so at what rate an enrollee may be reimbursed. 42 U.S.C. § 1395w-22(g)(1)(A). When a dispute with an enrollee arises on one of these issues, it is adjudicated according to CMS regulations. The MAO's initial decision regarding coverage is classified as an "organization determination," which the Medicare Act defines [**4]  as a decision "regarding whether an individual enrolled with the plan of the organization under this part is entitled to receive a health service under this section and the amount (if any) that the individual is required to pay with respect to such service." § 1395w-22(g)(1)(A). Organization  [*587]  determinations also include decisions by an MAO to not cover, reimburse, or provide for a treatment that "the enrollee believes" is covered by Medicare.² HHS's regulations define potential parties to an "organization determination" as an "enrollee," the "assignee of an enrollee," the "legal representative of a deceased enrollee's estate," or "[a]ny other provider or entity (other than the MA organization) determined to have an appealable interest in the proceeding." 42 C.F.R. § 422.574.

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