By Priya Bathija

Take a look in this issue of the Health & Medicine Reporter at our new section, CMS Quick Notes, which will keep you current on issues in Medicare/Medicaid reimbursement. This issue also brings you information on a recent U.S. Supreme Court decision that will clarify the law for ERISA plans in enforcing reimbursement provisions, which over the years, became quite complicated. And we highlight what you need to know about the State of Ohio Medical Board’s new rules regarding prescriptions to persons not personally seen by a physician. 

BDB also congratulates Canton shareholder Stephen Griffin for his successful jury verdict in the high-profile malpractice defense of an Akron cardio thoracic surgeon. Our attorney spotlight focuses in on Griffin’s work in the case and his other achievements for BDB.

In other updates, HIPAA-covered providers must remember to access a National Provider Identifier, a 10-digit number used to identify healthcare partners, by May 23, 2007. New rules and exceptions were established regulating electronic prescribing and electronic health records. And the Ohio State Supreme Court will review the constitutionality of the tort reform bill. Please see our full Updates section for more news that could be affecting you.

___________________________

By:  Thomas Himmelspach

Many health plans and disability plans include provisions allowing the plan or its fiduciary to seek reimbursement for benefits paid when the participant or beneficiary obtains a recovery from a third party for injuries that caused the plan to pay medical expenses. In recent years, the law became rather complicated in defining the conditions under which an ERISA plan could enforce a reimbursement provision. In a decision issued May 15, 2006, the Supreme Court of the United States took a significant step in clarifying those conditions.

The case, Sereboff v. Mid-Atlantic Medical Services, involved an ERISA plan, administered by Mid-Atlantic, that paid $75,000 in medical expenses to Marlene Sereboff and her husband for injuries they suffered in a car accident in California. Under the terms of the plan, participants were required to reimburse the plan for medical expense payments out of the proceeds of any recovery from a responsible party. When Sereboffs sued the tortfeasors in state court, Mid-Atlantic quickly sent a letter to their counsel asserting a lien on the anticipated proceeds of the suit. Sereboffs eventually settled the tort action for $750,000, but did not send Mid-Atlantic any money. Mid-Atlantic sued Sereboffs in District Court for reimbursement and to enjoin Sereboffs to set aside sufficient funds from the proceeds to cover the reimbursement claim, pending a final decision on the merits.

In a unanimous decision written by Chief Justice Roberts, the Supreme Court ruled that Mid-Atlantic could enforce the reimbursement provision against the Sereboffs’ tort recovery. The court reasoned that under Section 502(a)(3) of ERISA (29 U.S.C. § 1132(a)(3)), a plan fiduciary can enjoin any practice that violates the terms of a plan or obtain other “appropriate equitable relief” to (1) redress such violations or (2) enforce any term of the plan. It concluded that Mid-Atlantic’s claim for reimbursement against the settlement proceeds qualified as one for equitable relief.

The decision broadens the effect of the equitable relief provision beyond the Court’s holding in Great West Life and Annuity Ins. Co. v. Knudson, 534 U.S. 204. In Knudson, the plaintiff fiduciary sought to enforce a reimbursement provision of the plan after the beneficiary obtained a tort recovery, but the court denied the claim. The Court held that the plan was not seeking to enforce an equitable remedy, but was seeking money damages from the beneficiary and that its claim, therefore, was legal rather than equitable. Unlike the situation in Sereboff, the participant’s tort recovery, in Knudson, was held in a special needs trust and, therefore, was not in the participant’s possession. The Court concluded that equitable restitution would apply only to funds or property in the defendant’s possession. The Knudson Court required as a condition to the plan’s right to pursue equitable relief, compliance with all the technical requirements for relief that were imposed by a chancery court of equity.

Although the Sereboff decision relieves health plan sponsors from meeting those equity requirements, it did not overrule Knudson. Presumably, district courts can still follow Knudson and deny reimbursement claims where settlement funds are no longer in the participant’s possession.

The Court, in Sereboff, did, however, give guidance to sponsors of health plans on how to word the plan documents to assure a recovery on reimbursement claims. The plan document (and presumably the summary plan description) should require that the participant reimburse the plan from specifically identifiable funds. In Sereboff, the reimbursement provision of the plan required a beneficiary who “receives benefits” under the plan to “reimburse [Mid-Atlantic]” for those benefits from “[a]ll recoveries from a third party (whether by lawsuit, settlement, or otherwise.”

The second point that plan sponsors should note from the decision is that, despite the outcome in Sereboff, they may not be able to enforce language in a plan document that provides for reimbursement to the plan whether or not the participant has been wholly compensated. The Mid-Atlantic plan said that Mid-Atlantic’s share of the recovery “will not be reduced because [the beneficiary] has not received the full damages claimed, unless [Mid-Atlantic] agrees in writing to a reduction.” Sereboffs argued that it was not “truly equitable” for the plan to recover its benefit payments where the participant receives less than a full recovery. The Court, in footnote 2 at the end of the opinion, noted Sereboff’s argument that the reimbursement claim was not “appropriate,” but declined to address it because the plaintiff had not made the argument in the lower courts.

The Eleventh Circuit recently decided two plan reimbursement cases, addressed within the same opinion (Popowski v. Parrott and BlueCross BlueShield v. Carillo, 2006 U.S. App. LEXIS 21587, Aug. 24, 2006), holding that one reimbursement/subrogation provision could be enforced but the other not. The court found that the plan language at issue in Popowski v. Parrott was “essentially identical to the Supreme Court’s characterization of the plan language in Sereboff,” in that it “specifies both the fund (recovery from the third party or insurer) out of which reimbursement is due to the plan and the portion due the plan (benefits paid by the plan on behalf of the defendant.)” The court noted that the participants’ tort recovery went directly into their bank account and, therefore, was under their control, unlike the situation in Knudson.

In contrast, the Eleventh Circuit held that the plan in Carillo did not specify that reimbursement be made out of any particular fund, but imposed only a general reimbursement obligation upon the participant’s receipt of “a settlement, judgment, or other payment relating to the accidental injury or illness.” Since the plan did not identify a particular fund from which the reimbursement was to be made, the court held that the plan was materially different from the one considered in Sereboff, and that the fiduciary could not enforce the provision through a lien on the participant’s tort recovery. Further, the court noted that by requiring reimbursement “in full,” the plan failed to limit recovery to a “specific portion of a particular fund,” and the reimbursement provision could not be enforced under the equitable remedy provision of 29 U.S.C. § 1132(a)(3).

The Circuit Court for the District of Columbia also recently decided an ERISA reimbursement claim. In Moore v. CapitalCare, Inc., 2006 U.S. App. LEXIS 22075, August 29, 2006, the court affirmed the district court’s decision allowing an ERISA plan to enforce an equitable lien on a participant’s tort recovery. After the Sereboff decision, the participant dropped her challenge to the plan’s right to pursue her recovery under the equitable remedy provision of ERISA, and argued instead that the provision violated the make-whole rule, i.e., that in the absence of valid contractual or statutory language to the contrary, when the insured is entitled to recover for injuries from both a tortfeasor and his insurer, the insurer’s subrogation right for its payments applies only if the insured has been fully compensated for all of his loss. The court held that the plan’s subrogation provision was sufficiently clear to avoid the make-whole rule.

In summary, the Sereboff decision relaxed the requirements for a plan to use ERISA’s equitable remedy provision to enforce its reimbursement rights, and lower court rulings will help define the plan language that is effective to permit plan recoveries. The message to plan fiduciaries from Sereboff is to follow the participant’s tort litigation closely and act promptly to enforce the equitable lien against any recovery before it is spent or placed outside the possession or control of the beneficiary.

As a practice pointer, the plan might also join the beneficiary’s counsel from the tort action as a defendant in the reimbursement suit. Mid-Atlantic, for example, sued plaintiff’s counsel along with the Sereboffs on the reimbursement claim, alleging claims for conversion (for “intentionally and wrongfully assert[ing] dominion and control over the settlement payment, inconsistent with the Plan’s ownership over the settlement payment”) and tortious interference with contractual relations (for “negotiating the settlement check and in failing to reimburse the Plan, despite having knowledge of Plaintiff’s claims.”) That potential liability should prompt counsel to act cautiously and with attention to the plan’s reimbursement rights in handling the participant’s settlement or judgment proceeds.

Finally, health plans should note the distinction recognized by courts between reimbursement provisions, which authorize the plan to recover from the participant a portion of the participant’s tort recovery, and subrogation provisions under which the participant assigns to the plan the right to pursue the tortfeasor. The Sereboff and Knudson decisions concerned only reimbursement actions. In those states allowing subrogation actions by health plans, the plan may join directly in the participant’s tort action and thereby protect its interest in the proceeds of any settlement or judgment.

By:  Shila Nalawadi

Effective August 31, 2006, the State of Ohio Medical Board approved a new rule regarding prescriptions to persons not personally seen by a physician.  Under the new rule, found at Ohio Administrative Code section 4731-11-09, a physician is prohibited from prescribing, dispensing, or otherwise providing any controlled substance or any dangerous drug that is not a controlled substance to a person whom the physician has not personally physically examined and diagnosed. 

The rule provides an exception. Even if the physician has not personally examined the patient, he or she may  prescribe, dispense or otherwise provide a dangerous drug that is not a controlled substance while providing care in consultation with another physician who has an ongoing professional relationship with the patient and who has agreed to supervise the patient’s use of the drug. The physician must also meet all applicable standards of care and regulatory requirements.

The rule does not apply to the following situations:

Ø   A physician working in an institutional setting (i.e., a hospital, nursing home, rehabilitation facility, etc.) and providing drugs to a person admitted as an inpatient or resident of the institutional facility subject to applicable standards and legal requirements. 

Ø   A physician providing controlled substances or drugs to a person who is a patient of a colleague of the physician, if the drugs are provided pursuant to an on-call or cross coverage arrangement between the physicians.

Ø   A physician providing controlled substances or dangerous drugs to a person who the physician has accepted as a patient, if the physician scheduled or is in the process of scheduling an appointment to examine the patient and the drugs are intended to be used pending that appointment.

Ø   The provision of controlled substances or dangerous drugs by emergency medical squad personnel, nurses, or other appropriately trained and licensed individuals according to protocols approved by the State Board of Pharmacy.

Ø   An advance practice nurse prescribing or providing a controlled substance or dangerous drug under a standard care arrangement with a collaborating physician.

Ø   A physician serving as medical director or hospice physician in a licensed hospice program and providing controlled substances or dangerous drugs to a patient enrolled in the hospice program.

A violation of the rule, as determined by the Medical Board, constitutes a failure to maintain minimal standards of care applicable to the administration of drugs and a failure to conform to minimal standards of care of other similar practitioners under the same or similar circumstances, whether or not a patient is harmed, and may subject a physician to disciplinary action.