According to a Georgia federal district court ruling issued on February 11, 2016, a group of hospitals must exhaust their out-of-network Medicare Advantage (MA) payment dispute through the Department of Health and Human Services’ (HHS) administrative appeals process prior to bringing action in federal court.  

The case is Tenet Healthsystem GB, Inc. v. Care Improvement Plus S. Cent. Ins. Co., available here, and involves a group of 11 out-of-network hospital plaintiffs that furnished certain hospital services to beneficiaries of an MA plan.  The hospitals allege that, prior to furnishing the services to the beneficiaries, they obtained prior authorizations from the MA insurer and initially received payment for the services at issue.  Following a post-payment audit, the MA insurer recouped a significant portion of the funds reimbursed to the out-of-network hospitals, and the hospitals filed suit in federal district court.

The U.S. District Court for the Northern District of Georgia decided in favor of the MA insurer and determined that an MA organization’s payment obligations with respect to non-contracting providers must be administratively exhausted before they are challenged in district court because the claims at issue “are inextricable intertwined with a claim for Medicare benefits” where there is not a separate contract governing payment between the hospitals and MA insurer.

This decision represents an increasing body of law holding that out-of-network providers must exhaust their disputes with MA insurers through HHS’s appeals process before presenting the payment dispute to a federal district court.  See e.g. Doctors Med. Ctr. Of Modesto, Inc. v. Kaiser Found. Health  Plan, Inc., 989 F. Supp. 2d 1009, 1014 (E.D. Cal. 2013).

Reporter, Juliet M. McBride, Houston, +1 713 276 7448, jmcbride@kslaw.com.