Lacey Robinett v. Shelby County Healthcare Corporation

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.

We affirm.