California Court “rejects the contention that HMOs, MSOs, and IPAs are not secondary payers”

On May 23, 2018, in the case of MAO-MSO Recovery II, LLC, et al., v. Mercury General, Case Nos: CV 17-02525-AB and CV 17-02557-AB (C.D. Cal. May 23, 2018), the Honorable Judge Andre Birotte Jr. ruled in favor of MSP Plaintiffs when denying the defendant, Mercury General’s, motion to dismiss. In a twenty four-page opinion the Court recognized that the MSP Plaintiffs “have sufficiently alleged that (1) the MAOs suffered an injury in fact and (2) assigned their reimbursement rights…”

Moreover, the Court unequivocally rejected the notion that “HMOs, MSOs, and IPAs are not ‘secondary payers’” under the Medicare Secondary Payer Act (“MSPA”). Defendant Mercury General in its supplemental brief had referred to MSP Recovery Claims, Series LLC v. ACE American Insurance Co., No. 17-CV023749, 2018 WL 1547600, at *4-5 (S.D. Fla. Mar. 9, 2018), for the proposition that these entities could not assert a private cause of action under the MSPA. In Ace, the court concluded that only Medicare beneficiaries, healthcare providers, or MAOs could pursue a private cause of action pursuant to § 1395y(B)(3)(A).  However, the Court disagreed with the Ace court and found that MSOs and IPAs are considered “first-tier” or “downstream” entities, and thus, suffer the same injury as MAOs when a primary payer fails to pay or reimburse them.

This order is the first MSP victory outside of Florida following the Ace decision. Co-Counsel Partner Brent Wisner from Baum, Hedlund, Aristei & Goldman argued the motion on May 11, 2018.

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