Health Law Daily Additional corrective action requirements ordered after breach of settlement agreement
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Monday, February 6, 2017

Additional corrective action requirements ordered after breach of settlement agreement

Due to the HHS Secretary’s failure to fulfill the letter and spirit of a previous settlement agreement which sought to remedy a covert "improvement standard" which denied Medicare coverage to beneficiaries, a federal district court in Vermont has ordered that additional requirements be added to the agreement. The additional requirements include a corrective statement, and a national call that includes the corrective statement and a notice required by the court. (Jimmo v. Burwell, February 1, 2017, Reiss, C.).

Background: In January 2011, six individual Medicare beneficiaries and seven national organizations filed a class action lawsuit in the District of Vermont against the HHS Secretary alleging, among other things, that the Secretary imposed a covert rule that operated as an additional and illegal condition of Medicare coverage and resulted in the termination, reduction, or denial of coverage for thousands of Medicare beneficiaries annually. Their complaint alleged that the covert rule improperly imposed an "improvement standard," whereby coverage for certain home health care services was denied if a beneficiary's condition had not improved. They further alleged that because of the improvement standard, Medicare contractors and adjudicators were denying Medicare coverage merely because a patient was unlikely to improve, or in retrospect failed to improve, even when the patient needed skilled care to maintain his or her condition or to prevent or slow further deterioration.

Without admitting liability or wrongdoing, the Secretary agreed to settle the claims in accordance with the terms of a settlement agreement, which the court approved in January 2013. Among other things, the settlement agreement called for a "maintenance coverage standard" under which skilled nursing services would be covered when they were necessary to maintain a patient's current condition or prevent or slow further deterioration. The Secretary was required to make certain revisions to the Medicare Beneficiary Policy Manual to reflect the maintenance coverage standard, and to engage in a nationwide educational campaign through CMS utilizing written materials and interactive forums with providers and contractors to communicate the maintenance coverage standards.

In March 2016, the beneficiaries and organizations filed a motion to enforce the agreement claiming that the Secretary did not adequately disavow the improvement standard or disseminate the maintenance coverage standard, and that the educational campaign was so confusing and inadequate that little had changed as a result of the settlement agreement (see Jimmo maintenance coverage policy still needs clarity, improvement, August 22, 2016). Both parties submitted their proposed corrective action plans for remedying the breach to the court, and two additional requirements were ordered added to the original settlement agreement.

Judicial enforcement authority not unlimited. Although the respective proposed corrective action plans contained various parallel proposals, there were also significant points of divergence. The court noted that although the original settlement agreement provided for retention of enforcement jurisdiction by the court for a period of 36 months after conclusion of the Secretary’s educational campaign, the court’s authority to enforce the settlement agreement was not unlimited. For example, the agreement did not provide for the court to impose new obligations which the parties had not bargained for, correct any disparity in bargaining power, or devise its own scheme for implementing the settlement agreement.

An expansive list of educational activities. The Secretary had undertaken to correct deficiencies with the educational campaign, but the court found the beneficiaries’ and organizations’ proposal that certain obligations be continuing in nature was overly expansive. For example, they had argued that CMS be required to create a Jimmo webpage that was dynamic and not static and that they be authorized to participate in the creation of FAQs and new FAQs as developments demanded. They further proposed that a web portal for questions be added to the webpage. The court denied the proposal, noting that they had been free to negotiate for that relief in the settlement agreement. No reasonable interpretation of the Settlement Agreement could be deemed to include it, and it was therefore beyond the court's authority to require it.

Participation in additional training. The suggestion that additional training not be left to the Secretary for her unilateral development, but rather, that the beneficiaries and organizations be allowed to participate in the development was also denied by the court, which held that the court did not have the authority to order the Secretary to allow outside participation in her training. Provided that the Secretary offered accurate guidance regarding the maintenance coverage standard and affirmatively disavowed the improvement standard, she retained the discretion to determine the content of the training she agreed to undertake.

No indefinite monitoring. The court's jurisdiction over the settlement agreement did not extend to monitoring of indeterminate duration, and the court therefore found it sufficient if the Secretary certified the completion with the relief ordered by the court. The court considered each of the remaining requests for corrective action and concluded that those requests required a different and more extensive educational campaign than the settlement agreement authorized.

Addition of two requirements. For the foregoing reasons, the court essentially adopted the proposed corrective action plan of the Secretary, but with two additional requirements, and it further ordered completion on or before September 4, 2017. The two additional requirements were: (1) the adoption of a statement disavowing the improvement standard by reminding the Medicare community that the Medicare program will pay for skilled nursing care and skilled rehabilitation services when a beneficiary needs skilled care in order to maintain function or to prevent or slow decline or deterioration (i.e. adoption of the maintenance coverage standard); and, (2) upon at least 14 days’ notice to opposing counsel, the Secretary was ordered to hold a national call in which the corrective statement would be orally disseminated.

In all other respects, the court found that the Secretary's corrective action plan would serve as an appropriate cure for the breach of the settlement agreement and fulfill the remaining obligations for an educational campaign as set forth therein.

The case is No. 5:11-cv-17.

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