11th Circuit revives investor-funded Medicare secondary payer lawsuit against insurers

A Miami-area collections company backed by litigation funding investors has won another appeal victory over insurers, persuading a panel at the 11th Circuit Court of Appeals to reinstate Medicare Secondary Payer Act claims that were rejected by the court of first instance.

The panel ruled Monday that MSP Recovery and its affiliates adequately argued that Metropolitan Insurance Group units failed to reimburse Medicare Advantage organizations for medical treatments that should have been paid for by their auto insurers. The MSP said in a press release that the decision marks the fourth time the 11th Circuit has reversed district court decisions to dismiss its claims.

“This is yet another example of MSP Recovery overcoming obstacles,” said MSP Chief Legal Officer Frank C. Quesada. “The initial dismissal of this case has not deterred us from moving forward and once again overturning a lower court decision. On a case-by-case basis, we continue to establish and solidify the law relating reimbursements under the Medicare Secondary Payer Act.

The Medicare Secondary Payer Act allows the government, Medicare Advantage plan insurers, and healthcare providers to sue for double damages if they prove they provided medical care that should have been paid for by a primary insurer. Medicare Advantage Plan insurers assign their recovery rights to MSP Recovery and its affiliates for a fee.

The company was founded by Coral Gables, Florida attorney John H. Ruiz, who told the Claims Journal in 2020 that he spent $150 million in investor money to develop an algorithm he uses to identify beneficiaries who received Medicare or Medicaid care that should have been paid for by auto, workers’ compensation, and liability insurers.

The company went public as a special purpose acquisition company last October and announced that Virage Capital Management had agreed to pay $3 billion for the right to collect 50% of future rewards against insurance companies.

However, judges at the US District Court in South Florida have not always been receptive to MSP Recovery’s collection efforts. United States District Court Judge Robert N. Scola refused to accept the method used by MSP Recovery to state its claims. The company submitted as an attachment to its complaint a spreadsheet containing data on hundreds of Medicare beneficiaries who had settled claims with metropolitan insurers but were still seeking treatment through their Medicare providers. MSP said it knew Medicare payments were made because it matched the assignor’s claims data with a database that lists settlements that metropolitan insurers had reported to the Centers for Medicare and Medicaid Services.

Judge Scola failed to show that the payments made by the assignors were for care that could have been provided by Metropolitan and ruled that the exhibit could not “substitute for factual allegations”. The 11th Circuit panel disagreed.

The panel’s opinion says the court ruled in 2014 that documents attached to a complaint can be considered when deciding motions to dismiss. Other decisions have established that a plaintiff in the Medicare Secondary Payer Act cases can establish that an insurer is liable for medical treatment by showing that it has entered into a settlement agreement with a beneficiary.

“A defendant’s liability can be shown in a number of ways, including having a contractual obligation to pay and entering into a settlement agreement with a beneficiary for medical expenses related to an accident,” the opinion states.

MSP Recovery said in its press release that the decision has “broader implications” as several other South Florida District judges have denied, or partially denied, its claims in other pending lawsuits.

“MSP Recovery believes that this latest Eleventh Circuit decision will likely impact the scope of the claims subject to these actions,” the press release read.

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