Date: 07-18-2018

Case Style:

Case Number: 17-1336

Judge: Smith

Court: United States Court of Appeals for the Eighth Circuit on appeal from the Eastern District of Arkansas (Craighead County)

Plaintiff's Attorney: Brandon Lacy and Jeff Scriber

Defendant's Attorney: Don L. Hearn, Jr., John I. Houseal, Jr., John Irving Houseal, III, Mark Alan Mayfield, Jeffrey W. Puryear, Ryan M. Wilson

Description: Lacey Robinett appeals the district court’s 1 grant of judgment on the pleadings
to Shelby County Healthcare Corporation (“the Med”) and Avectus Healthcare
1The Honorable D.P. Marshall Jr., United States District Judge for the Eastern
District of Arkansas.
Solutions, LLC. Robinett contends that the district court erroneously concluded that
the federal and Arkansas Medicaid laws do not bar a medical services provider from
billing patients directly until and unless the provider bills Medicaid. We affirm.
I. Background
Lacey Robinett was severely injured in an automobile accident in Arkansas.
Another vehicle’s driver was at fault. An air ambulance transported Robinett to the
Med, the nearest trauma center, in Memphis, Tennessee, for immediate treatment. As
a general condition of admission, the Med requires its patients to assign to the facility
all of their health, hospitalization, and other insurance benefits.2 At the time of her
admission, Robinett was a Medicaid recipient. The Med had an agreement with
Arkansas Medicaid to provide services to Medicaid beneficiaries from Arkansas.
However, subsequent to treating Robinett, the Med chose not to bill Arkansas
Medicaid for its services. Instead, pursuant to Tenn. Code Ann. § 29-22-101, the Med
pursued a lien against Robinett’s third-party claim against the tortfeasor “for all
reasonable and necessary charges for hospital care, treatment and maintenance.”
Following the accident, Robinett filed suit against the other driver who caused
the wreck. She settled her damages claim with the at-fault driver’s insurance company
and received $100,000 in compensation. The Med billed Robinett for $23,750.54, the
amount the Med claimed she owed for its medical services. Because Robinett was
Medicaid eligible under Arkansas law, the Med could have billed Arkansas Medicaid
but chose to bill Robinett directly instead. The Med contracted with Avectus as a
collection agent to recover the charges from Robinett. In response to the collection
effort, Robinett filed a class action suit against the Med and Avectus, alleging that
both federal and Arkansas Medicaid laws prohibited the Med from directly billing
Medicaid beneficiaries. The Med moved for judgment on the pleadings. The district
2A Med employee noted on Robinett’s admission form that the document was
left unsigned because of Robinett’s medical condition at the time of admission.
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court ruled for the Med and Avectus, concluding that they had “gambled on
Robinett’s potential recovery from a third party, and won.” Robinett v. Shelby Cty.
Healthcare Corp., No. 3:16-cv-00188-DPM, 2017 WL 417197, at *1 (E.D. Ark. Jan.
31, 2017). Robinett appeals.
II. Discussion
Robinett contends the district court misapplied both federal and Arkansas
Medicaid law when it granted judgment on the pleadings in favor of the Med and
Avectus. “We review the grant of judgment on the pleadings de novo, viewing the
facts in [Robinett’s] complaint as true and granting all reasonable inferences in her
favor.” McIvor v. Credit Control Servs., Inc., 773 F.3d 909, 912 (8th Cir. 2014)
(citing Poehl v. Countrywide Home Loans, Inc., 528 F.3d 1093, 1096 (8th Cir.
2008)).
A. Patient Billing Under Federal Medicaid Laws
Robinett contends that federal law bars direct patient billing. She grounds her
argument on 42 U.S.C. § 1396a(a)(25)(C), which requires:
that in the case of an individual who is entitled to medical assistance
under the State plan with respect to a service for which a third party is
liable for payment, the person furnishing the service may not seek to
collect from the individual (or any financially responsible relative or
representative of that individual) payment of an amount for that service
(i) if the total of the amount of the liabilities of third parties for that
service is at least equal to the amount payable for that service under the
plan . . . , or (II) the amount by which the amount payable for that
service under the plan . . . exceeds the total of the amount of the
liabilities of third parties for that service . . . .
Robinett interprets the provision to prohibit a Medicaid services provider from
all direct patient billing. The district court disagreed, citing to 42 U.S.C.
§ 1396a(a)(25)(B), (H), and (I)(ii). Based on its interpretation of those provisions, the
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district court concluded that § 1396a(a)(25)(C)’s prohibition of direct patient billing
only comes into effect once a provider has opted to bill and to accept payment from
Medicaid. Although we have not had the occasion to interpret the provision, several
of our sister circuits have concluded that § 1396a(a)(25)(C) has a much narrower
scope than Robinett suggests. We agree. See Mader v. United States, 654 F.3d 794,
800 (8th Cir. 2011) (en banc) (“We review questions of statutory interpretation de
novo, which requires us to examine the text of the statute as a whole by considering
its context, object, and policy.” (citation omitted)).
Medicaid is a “payer of last resort.” Ark. Dep’t of Health & Human Servs. v.
Ahlborn, 547 U.S. 268, 291 (2006) (quoting S. Rep. No. 99-146, at 313 (1985)). “This
means that all other available resources must be used before Medicaid pays for the
medical care of an individual enrolled in a Medicaid program.” Caremark, Inc. v.
Goetz, 480 F.3d 779, 783 (6th Cir. 2007). States are required
to implement “third party liability (TPL) programs” which “ensure that
Federal and State funds are not misspent for covered services to eligible
Medicaid recipients when third parties exist that are legally liable to pay
for those services.” Medicaid Programs; State Plan Requirements and
Other Provisions Relating to State Third Party Liability Programs, 55
Fed. Reg. 1423, 1423–24 (1990). The Medicaid statute requires that
each state agency administering the Medicaid program take measures to
find out when third parties (like private insurers) are legally obligated
to pay for services covered by the plan. See 42 U.S.C. § 1396a(25)(A).
Each state plan must include a method of pursuing claims against such
third parties. See id. If third party liability is discovered after medical
care has been provided, the state agency must seek reimbursement from
the third party. See 42 U.S.C. § 1396a(25)(B).
Wesley Health Care Ctr., Inc. v. DeBuono, 244 F.3d 280, 281 (2d Cir. 2001). But, in
line with Medicaid’s nature as a voluntary participation program, see 42 U.S.C.
§ 1396a(a)(23), federal law does not require that a medical services provider bill
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Medicaid every time it treats a Medicaid beneficiary. See Medicaid Program; State
Plan Requirements and Other Provisions Relating to State Third Party Liability
Programs, 55 Fed. Reg. at 1428 (“The provider is not restricted from receiving
amounts from third party resources available to the recipient (or his or her legal
representative).”).
Federal Medicaid law precludes direct patient billing in two specific instances.
Section 1396a(a)(25)(C) prohibits medical providers from substitute billing and
balance billing. See Miller v. Wladyslaw Estate, 547 F.3d 273, 282–83 (5th Cir. 2008)
(citations omitted). A medical provider engages in substitute billing when it already
has accepted payment from Medicaid but tries to refund the payment in order to bill
the patient directly, usually because Medicaid reimbursements are often much lower
than the provider’s “customary fee[s].” Id. at 283 (citing Evanston Hosp. v. Hauck,
1 F.3d 540, 542 (7th Cir. 1993)). “Balance billing occurs when a provider accepts
payment from Medicaid and then seeks to recover from the patient the balance
between that payment and its customary fee.” Id. (emphasis added) (citing Spectrum
Health Continuing Care Grp. v. Anna Marie Bowling Irrevocable Tr. Dated June 27,
2002, 410 F.3d 304, 314 (6th Cir. 2005)). Thus, § 1396a(a)(25)(C) only becomes
relevant once the provider has billed Medicaid and accepted payment for services
provided to a beneficiary. The provision does not bar a provider from taking a chance
that a Medicaid-eligible patient has a non-Medicaid source of payment for the
medical services rendered. The provider thus may opt to attempt collection directly
from the patient or a liable third party instead of seeking a certain but likely reduced
payment from Medicaid.
Not only does the plain language of the statute dictate this interpretation, this
reading comports with Medicaid’s role as the payer of last resort. The federal
Medicaid statutory scheme is designed to ensure that where there are liable third
parties, Medicaid’s expenses are reimbursed. Other federal regulations reinforce
§ 1396a(a)(25)(C)’s mandate. Section 433.139(b)(1) of 42 C.F.R. requires that if a
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Medicaid “agency has established the probable existence of third party liability at the
time the claim is filed, the agency must reject the claim and return it to the provider.”
“This method of payment is called ‘cost avoiding;’ it entails shifting to the provider
the burden of securing payment from third parties.” Miller, 547 F.3d at 278 (citing
Wesley Health Care Ctr., 244 F.3d at 282). Alternatively, Medicaid may “pay and
chase,” where “the state Medicaid agency ‘pays the total amount allowed under the
agency’s payment schedule and then seeks reimbursement from the liable third
party.’” Id. (quoting Wesley Health Care Ctr., 244 F.3d at 282); see also 42 U.S.C.
§ 1396a(a)(25)(B); 42 C.F.R. § 433.139(c). Thus, federal Medicaid regulations run
counter to Robinett’s suggestion, because the “cost avoidance” measure requires
medical providers to bill liable third parties, or they may bill the patient directly.
Finally, legislative history supports our conclusion. “[T]he legislative history
of the third-party liability evinced a congressional intent that ‘the Medicaid
program . . . be reimbursed from available third party sources to the fullest extent
possible . . . . ’” Ahlborn, 547 U.S. at 290 (first alteration in original) (citation
omitted). Congress intended to protect Medicaid’s coffers to the fullest extent
possible. Unless and until a medical services provider chooses to charge and to accept
payment from Medicaid, the provider is free to attempt to recover from the patient or
a liable third party.
In Miller, the Fifth Circuit confronted an issue remarkably similar to the
present case. There, an automobile accident caused severe burns to the plaintiff, who
then received emergency treatment at a Louisiana hospital. 547 F.3d at 276. At the
time of treatment, the plaintiff was not a Medicaid beneficiary, and the hospital filed
a medical lien, pursuant to Louisiana law, against any potential tort settlement. Id.
Subsequently, the plaintiff sued the at-fault third party for injuries from the accident
and recovered. Id. By then, the plaintiff had become Medicaid-eligibile, and the
hospital had obtained Medicaid approval for his treatment and hospital stay. Id.
However, it then decided not to bill Medicaid and to seek remuneration through the
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lien against the plaintiff. Id. The Fifth Circuit held that the hospital could undertake
such actions because
it is clear that the limitations on a health care provider’s ability to obtain
reimbursement for the services it provides a Medicaid-eligible patient
are not triggered until a provider bills and accepts payment from
Medicaid for those services. If a provider chooses not to bill and accept
payment from Medicaid, then it remains free to seek its entire customary
fee from the patient. Of course, the provider runs the risk of not
recovering anything from the patient because the patient may never have
the ability to pay his medical expenses, or the third party payment may
not come to fruition. The federal Medicaid scheme, however, gives
providers the opportunity to make a “calculated choice” whether to seek
reimbursement from Medicaid or from the patient.
Id. at 284–85.
Like the hospital in Miller, the Med chose to make the calculated choice of
billing Robinett directly. This was permissible. We hold that federal law did not bar
the Med from attempting recovery from Robinett or a liable third party because the
Med had opted not to bill and to accept payment from Arkansas Medicaid.
B. Patient Billing Under Arkansas Medicaid Laws
Robinett next argues that even if federal law permits the Med to bill her
directly, Arkansas law does not. She asserts that the district court erroneously
concluded otherwise. We review de novo the district court’s interpretation of
Arkansas law. See Lindsay Mfg. Co. v. Hartford Accident & Indem. Co., 118 F.3d
1263, 1267 (8th Cir. 1997) (citing Salve Regina Coll. v. Russell, 499 U.S. 225, 231
(1991)).
Robinett says that Arkansas law goes beyond the federal bar against balance
and substitute billing. Arkansas
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prohibit[s] any provider of medical services who participates in the
Arkansas Medicaid program to bill or receive payment from any
Medicaid-eligible person, his or her spouse, relative, guardian, or any
other prospective payee for services or considerations for which
payment is either payable in full or has been paid in full by the program.
Ark. Code Ann. § 20-77-104(a). Further, Arkansas law
prohibit[s] any payment by any Medicaid-eligible person or his or her
payee in excess of the rate or fee for service that the medical services
provider has agreed to accept as payment in full as evidenced by written
agreement or contract to participate in the program.
Id. § 20-77-104(c). The Arkansas Supreme Court has not interpreted this statute.
Robinett urges us to interpret the phrase “payable in full” to include medical services
rendered but which have not yet been billed. We read the phrase differently.
“[I]n legal contexts, ‘payable’ [means] . . . a sum of money ‘that is to be paid.
An amount may be payable without being due.’” Ingram v. Terminal R.R. Ass’n of St.
Louis Pension Plan for Nonschedule Emps., 812 F.3d 628, 636 (8th Cir. 2016)
(quoting Payable, Black’s Law Dictionary (9th ed. 2009)). In Robinett’s case, nothing
was “payable” by Medicaid, because prior to the Med billing Medicaid, the amount
“to be paid” is zero. But, if and when the Med bills Medicaid, then the Med must
accept what Medicaid pays as “payable in full.” This interpretation comports with the
Medicaid payment scheme. Medicaid, by design, does not pay the full price for
medical services, nor does it pay for every service provided. See Spectrum Health
Continuing Care Grp., 410 F.3d at 313–14. Until the medical provider bills for
services rendered, Medicaid owes the provider nothing. As such, nothing is capable
of being paid until the provider bills for it. Thus, Ark. Code Ann. § 20-77-104(a)
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simply reinforces the federal ban on substitute billing. Likewise, Ark. Code Ann.
§ 20-77-104(c) codifies into Arkansas law the federal ban on balance billing.
In addition, § 20-77-104’s title, “Double Billing—Legislative Intent,” shows
that the Arkansas Legislature meant to ban double billing by a medical provider,
either through substitute or balance billing. Nothing in the statute prohibits direct
patient billing when the provider opts to forego Medicaid’s guarantees and bill the
patient or a liable third party. Finally, the Arkansas Department of Human Services,
which administers Arkansas Medicaid, interprets neither federal nor Arkansas law to
prohibit a medical provider’s decision to forego Medicaid and pursue other avenues
of recovery. In its Arkansas Medicaid Beneficiary Handbook, the department cautions
patients that “[d]octors do not have to bill Medicaid . . . , even if they are Medicaid
. . . providers.” Defendant Shelby County Healthcare Corporation’s Rule 12(c)
Motion for Judgment on the Pleadings, Exhibit A, at 8, Robinett v. Shelby Cty.
Healthcare Corp., No. 3:16-cv-00188-DPM (E.D. Ark. Sept. 29, 2016), ECF No.
23-2. Thus, Robinett’s suggested reading of Arkansas Medicaid law is not supported
by the statute’s title, its plain language, or by the agency that administers Arkansas
Medicaid. We hold that, like the federal provisions, the Arkansas Medicaid statutes
do not prohibit a medical provider from foregoing Medicaid’s guaranteed payment
for covered services and opting instead to bill the patient or liable third parties
directly.

Outcome: We affirm.

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