Erringer v. Thompson

No. CIV01-112TUC-BPV (D. Ariz), filed March 16, 2001

Last Updated: December 15, 2004

Issue: Whether CMS’s procedures for promulgating Local Coverage Determinations (LCDs) and for informing beneficiaries of the application of LCDs to their claims violates the APA, the Medicare statute and regulations, and the due process clause.

Relief sought: Nationwide class alleged.  Declaratory and injunctive relief against HHS prohibiting reliance on LCDs to deny Medicare coverage until standards are promulgated and notice of the LCD’s applicability is provided to the beneficiary.

Discussion: This case challenges Medicare policies and practices involved in denial of payment for health services based on Local Coverage Determinations (LCDs). There are approximately 8,000 such rules nationwide. They are created by private intermediaries and carriers that contract with Medicare, although there are no regulations or published policy establishing the criteria and procedures for enacting LCDs. Furthermore, Medicare denies claims at the initial and review/reconsideration levels without giving beneficiaries notice of these rules so that they can respond to them.

Named plaintiffs Christopher T. Erringer and Lawrence Corcoran have serious medical conditions that have been successfully treated by their physicians. Medicare denied coverage of their treatments, but did not disclose in its initial or review denial notices to plaintiffs that the denials were based on Local Coverage Determinations (Until recently these rules were known as Local Medical Review Policies. See Medicare Program Integrity Manual ‘ 3.2, et seq. However, in the Benefits Improvement and Protection Act of 2000 they were called Local Coverage Determinations, (Pub. Law. 10-554, Sec. 522).  Because plaintiffs‘ notices did not advise them of the application or contents of the LCDs, they were unable to submit evidence to show that the LCDs are unreasonable or inapplicable to their medical circumstances.

Plaintiffs challenge the deficiencies in defendant‘s promulgation and notice practices related to Local Coverage Determinations on statutory and Due Process grounds. They bring this action on behalf of themselves and a class of Medicare beneficiaries also subjected to denials based on improperly enacted Local Coverage Determinations.

The two named plaintiffs are residents of, respectively, Tucson, AZ and Norwich, CT. One has just requested review of his initial determination and the other is waiting for an ALJ hearing. If there are additional Medicare beneficiaries who have been denied coverage based on Local Coverage Determinations (or who think they may have been, since often the initial denial notices do not clearly state this reason for denial,) please contact Sally Hart, Center For Medicare Advocacy (520) 322-0126.

Status: The complaint was filed and assigned to a magistrate judge, whom both parties accepted to act in the capacity of a district judge.  On September 15, 2001, after briefing and argument, the judge denied defendant’s motion to dismiss, based on the failure to exhaust administrative remedies, in a comprehensive decision which found alternative bases for jurisdiction under 42 U.S.C. § 405(g) and 28 U.S.C. § 1331.  The Defendant’s answer was filed on October 4, 2001.  Several other individuals have been allowed to intervene, and plaintiffs have moved for certification of a nationwide class.  That motion was heard on March 10, 2002.  Plaintiffs will soon begin the discovery process.

As of November 7, 2002 the parties had reached a tentative agreement to settle the claim concerning inadequacy of notice given to beneficiaries when their claims for payment are denied in whole or in part based on application of a Local Medical Review Policy (LMRP) or a Local Coverage Determination (LCD). The Medicare administration has agreed to give beneficiaries specific notice that: (1) an LMRP or LCD was used in making the decision to deny their claim; (2) an LMRP or LCD provides a guide to assist in determining whether a particular item or service is covered by Medicare; (3) a copy of the LMRP or LCD is available from the local intermediary or carrier by calling the toll free telephone number listed on the beneficiary’s Medicare Summary Notice; (4) the beneficiary can compare the facts in his/her case to the guidelines set out in the LMRP or LCD to see whether additional information from his/her physician might change Medicare’s decision; and (5) the beneficiary may submit any additional information regarding any appeal. The Agreement also provides for a mechanism by which beneficiaries may receive a copy of the LMRP or LCD used in their cases, provides for monitoring of Medicare contractors’ compliance with the proposed Agreement’s provisions, and provides for a payment of $23,061.00 in attorney’s fees and costs to Class Counsel.

After a fairness hearing, the Court approved the settlement of the notice claim (Click here to read the Notice of Proposed Settlement and Fairness Hearing).  The parties’ cross-motions for summary judgment on the failure to promulgate criteria for LCD/LMRPs were argued on February 2, 2003.

On May 12, 2003 the court ruled against plaintiffs on their claim that LCDs are promulgated in violation of the Administrative Procedure Act (APA)requirement for notice-and-comment rulemaking. It held that the rule relevant to LCDs was interpretive, not substantive, and therefore was not subject to the APA’s notice and comment requirements. It also concluded that the Medicare statute itself, 42 U.S.C. § 1395hh(a), does not establish more stringent publication requirements.  Plaintiffs’ motion for reconsideration was denied on June 17, 2003 and plaintiffs appealed.  After oral argument, the Court of Appeals affirmed.  371 F.3d 625 (9th Cir. 2004).  Applying a test from a prior Ninth Circuit decision, the Court concluded that the rules providing criteria for development of LCDs are interpretive and therefore not subject to the notice and comment requirements of the APA. Plaintiffs did not seek rehearing or file a petition for certiorari with the Supreme Court, so that the case is now at an end.

The protections described in the settlement of February 2003 are described in CMS Program Memorandum AB-02-155, dated November 1, 2002. They require contractors to use a new Medicare Summary Notice (MSN) message that states (1) a LMRP/LCD was used in making the decision to deny the claim; (2) it provides a guide to assist in determining whether a particular item or service is covered by Medicare; (3) a copy of the policy is available from the contractor by calling the toll free telephone number listed on the notice; (4) the beneficiary can compare the facts in his/her case to the guidelines set out in the LMRP/LCD to see whether additional information from his/her physician might change Medicare’s decision; and (5) the beneficiary may submit any additional information regarding the appeal. The settlement also requires a mechanism for beneficiaries to obtain copies of the LMRP/LCDs used in their cases.These procedures should have been operational by October 1, 2003. The Center for Medicare Advocacy is interested in knowing whether Medicare contractors have fully implemented them. If advocates encounter situations where Medicare claims appear to have been denied based on local coverage rules, but the beneficiary’s written denial notice did not contain the information set out above, or the beneficiary was unable to obtain a copy of the local coverage rule, we would like to hear from you. Please contact Center for Medicare Advocacy attorney Sally Hart, lead counsel in Erringer, at (520)327-9547, or shart @ medicareadvocacy.org (remove spaces).

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NOTICE OF PROPOSED SETTLEMENT AND FAIRNESS HEARING

if you are a Medicare beneficiary you may be a member of a class action lawsuit involving local coverage policies. This case challenges, among other things, the notice given when claims are denied by Medicare based on local coverage policies. The United States District Court for the District of Arizona has certified a nationwide class action in this case, Erringer v. Thompson, No. CV 01-112 TUC BPV (D. Ariz.), and the parties have submitted a proposed Settlement Agreement to the Court for its approval.

YOU HAVE THE RIGHT TO RECEIVE A COPY OF, AND COMMENT ON, THE PROPOSED SETTLEMENT AGREEMENT.

To receive a copy of the Agreement, please write or email class counsel at one of the addresses listed below. A copy of the proposed Agreement is also available on the Web at: . If you want to comment on the proposed Agreement, you must submit written comments to the Court.

SUMMARY OF AGREEMENT

The proposed Agreement settles all claims relating to the initial notice provided to Medicare beneficiaries, whose claims for payment are denied in whole or in part based on application of a Local Medical Review Policy (LMRP) or a Local Coverage Determination (LCD), regarding: (i) the use of such policies in the determination of a beneficiary’s claim for benefits, and (ii) the beneficiary’s opportunity to provide additional evidence or information in support of his/her claim for benefits. In exchange for Plaintiffs releasing all such claims, Defendant agrees to provide beneficiaries whose claims are denied based on an LMRP or LCD notice that: (1) an LMRP or LCD was used in making the decision to deny their claim; (2) an LMRP or LCD provides a guide to assist in determining whether a particular item or service is covered by Medicare; (3) a copy of the LMRP or LCD is available from the local intermediary or carrier by calling the toll free telephone number listed on the beneficiary’s Medicare Summary Notice; (4) the beneficiary can compare the facts in his/her case to the guidelines set out in the LMRP or LCD to see whether additional information from his/her physician might change Medicare’s decision; and (5) the beneficiary may also send any additional information regarding any appeal. The Agreement also provides for a way that beneficiaries may receive a copy of the LMRP or LCD used in their case, provides for monitoring of Medicare contractors’ compliance with the proposed Agreement’s provisions, and provides for a payment of $23,061 in attorney’s fees and costs to Plaintiffs’ counsel.

FAIRNESS HEARING

The Court will conduct a fairness hearing before Magistrate Judge Bernardo P. Velasco, at the United States District Court, Evo A. DeConcini U.S. Courthouse, 405 W. Congress Street, Tucson, Arizona 85701, on February 3, 2003, at 9:00 a.m., to determine whether to approve the proposed Agreement as fair, adequate and reasonable. Objections to the proposed Agreement will be considered by the Court if such objections are filed in writing with the Clerk of Court at the above address, on or before December 31, 2002. Attendance at the hearing is not necessary to have an objection considered; however, class members wishing to be heard orally in opposition to the proposed Agreement should indicate in their written objection their intention to appear at the hearing.

CLASS COUNSEL

The attorneys representing the plaintiffs and the class as class counsel are:

Sally Hart Arizona Center for Disability Law and Center for Medicare Advocacy, Inc. 100 N. Stone Ave., Suite 305 Tucson, AZ 85701
(520) 327-9547
shart @ acdl.com

Dina Lesperance Arizona Center for Disability Law
3839 N. Third St., Suite 209 Tucson, AZ 85012-2069

Gill Deford Center for Medicare Advocacy, Inc.
P.O. Box 350 Willimantic, CT 06266
(860) 456-7790

COUNSEL FOR DEFENDANT

Counsel for Defendant is:

Ori Lev
United States Department of Justice
P.O. Box 883 Washington, D.C. 20044