Healthcare payors are constantly attempting to escape payment liability and Medicare Advantage Organizations are no exception. They walk the gray area between acting like a commercial plan but hide behind the veil of the Medicare Act. We are seeing more and more cases where the payor as a Medicare Advantage Organization moves a case originally filed in state court to federal court based on the assertion that it is a federal entity. These Medicare Advantage Organizations claim this status by virtue of their respective contracts with the government to administer Medicare benefits to Medicare enrollees. Once in federal court, these organizations usually claim the hospital or other healthcare provider failed to exhaust various administrative procedures mandated by the Medicare program.

Medicare Advantage Organizations operate under Medicare Part C.  Under Part C, these organizations may have the freedom to set up their own procedural process when they enter into contracts with healthcare providers. Courts have recognized this freedom to contract with providers because such organizations bear the ultimate financial risk for providing and arranging healthcare services for Medicare beneficiaries under Medicare Part C. The Medicare program pays Medicare Advantage Plans a fixed monthly payment in advance, regardless of the value of the services actually provided to beneficiaries; in exchange, the Medicare Advantage plan “assumes financial responsibility and full financial risk for providing and arranging healthcare services” to beneficiaries. 42 U.S.C. § 1395w-23(a)-(b); 42 C.F.R. § 422.100(a). These regulations allow Medicare Advantage organizations to privately contract with healthcare providers to render medical services. See 42 U.S.C. § 1395w-25(b)(4). And many of them do. Federal regulations that govern Medicare Advantage Organization’s allow for unrestrictive contracting parameters, and generally, the parties may negotiate their own terms as long as they deliver the Medicare services they agreed to provide. As a result of these federal regulations, the healthcare provider can negotiate different timelines for appeals in contracts with these plans and is not necessarily relegated to the Medicare’s appeals process.

In other words, the appeals process can be negotiated at the contract level and the provider is not required to adopt the Medicare appeals deadlines and procedures.  Hospitals and other providers should determine what is in their best interests when it comes to administrative procedures and negotiate accordingly..