On April 27, 2016, a California state court judge in a Complex Litigation department for the County of Los Angeles, ruled in favor of 13 of our hospital clients on an important matter involving substantive and financial rights: Whether hospitals must exhaust administrative remedies under Medicare law before they may seek reimbursement directly against Medicare Advantage (“MA”) plans in court. After concluding that express and implied preemption do not apply to hospital claims for emergency services against a non-contracted MA plan, Judge Jane Johnson ruled that the such hospital claims do not “arise under” the Medicare Act and therefore, the hospitals are not required to appeal each denial administratively before filing a lawsuit. Without this ruling, the hospitals would only be able to pursue payment for emergency services rendered to MA beneficiaries (or defend alleged overpayments) by filing thousands of individual appeals and pursuing them through multiple levels – an extremely costly and administratively burdensome process – only to end up filing or defending the claims in lawsuits once administrative remedies were exhausted.

Courts are split on this issue. For example, courts in Georgia, Florida, and Ohio, have found that hospitals must exhaust administrative remedies, while courts in Alabama, Texas, and New York6 have ruled to the contrary.