1. law, govt and politics

Missouri Organization
of Defense Lawyers
P.O. Box 1072 Jefferson City, MO 65102
Phone: (573) 636-6100 Website: www.modllaw.com
Spring, 2009
MODL President’s Message
by Martin J. Buckley, MODL President Buckley & Buckley, L.L.C.; St. Louis, MO
The Annual Meeting is fast
approaching. Block these dates
on your calendar now: June 4, 5
and 6, 2009. The Annual Meeting will feature outstanding CLE
programs, networking opportunities and fun for the whole family.
As usual, the most competitive
golf tournament in the state will
take place on Saturday. A limited
number of rooms will be reserved
at a special rate at the Hilton
Branson Convention Center, so early reservations are recommended. Be on the lookout for the brochure with reservation
information, which will be mailed to all members very soon.
Congratulations to the citizens of Greene County who voted to
adopt the Missouri Non-Partisan Court Plan in the November
general election. Despite a well-financed campaign opposing
adoption of the plan, the voters made the right choice. While
MODL contributed to the effort in Greene County, the real
credit for this success goes to the members of the Greene
County Bar who spearheaded this effort.
As noted in a previous newsletter, a significant part of MODL’s
mission is to work for improvement in the civil adversary system
of jurisprudence and to promote improvements in the administration of justice. That is why MODL has continued to work to
assure that we will have a qualified, unbiased judiciary through
its defense of the Missouri Non-Partisan Court Plan. (If you
spend any time speaking with defense lawyers from states where
appellate judges are elected, you can appreciate the importance
of maintaining the Missouri Plan.) MODL also works for
improvement in the administration of justice through its assistance to the National Foundation for Judicial Excellence (NFJE).
The NFJE is an independent, 501(c)(3) charitable foundation
which provides judges with educational programs to enhance the
rule of law and administration of justice. It was created in 2004
by the Defense Research Institute. Since 2005, NFJE has hosted
an annual symposium on developments in the law. These symposia are attended by an average of 130 state judges each year.
These unbiased presentations give state appellate court judges
an opportunity to attend high quality seminars which they might
not otherwise be able to attend because of state budgetary constraints. How unbiased are these symposia? Last year’s event
featured a presentation by noted plaintiff’s lawyer Edward D.
“Chip” Robertson, Jr., a former member of the Missouri
Supreme Court.
As a charitable organization, NFJE needs our support. It exists
on contributions from the various State and Local Defense Organizations and contributions from DRI members. On your DRI
dues statement, there is an option to contribute $25 to NFJE.
Please support NFJE by making the $25 contribution on your
DRI payment. As most of us do not make the physical arrangements to cut the check, please make sure your office manager or
accounts payable employees know that you want to contribute
to NFJE. The service it provides to the administration of justice
is of benefit to all of us.
Finally, just after Christmas, MODL lost a great friend and colleague. Chuck McPheeters, the secretary of MODL, passed away
on December 28. He was a skilled lawyer, a great friend, and a
delightful companion in any circumstance. He will be sorely
missed and fondly remembered in many stories for years to
come, especially by those of us who worked with him on the
Board. Requiescat in pace.
Get Ready for Summer!
MODL Annual Meeting
June 4 - 6, 2009
Hilton Branson Convention Center
Medical Malpractice Legal Update
by Michael J. Smith and Tricia J. Mueller Lashly &Baer St. Louis, MO
This article provides a summary of some of the significant Missouri court decisions affecting
medical malpractice litigation handed down in the past 12 months.
Res Ipsa Loquitur
Statute of Limitations – Tolling
Sides v. St. Anthony’s Medical Center, 258 S.W.3d 811
(Mo. banc 2008)
State ex rel. Bloomquist v. Schneider, 244 S.W.3d 139
(Mo. banc 2008)
Plaintiff Janice Sides underwent a lumbar laminectomy with
spinal fusion at St. Anthony’s Medical Center. Three days
after being discharged she learned that she was infected with
e-coli bacteria. She filed suit in June 2005, and her three
amended petitions alleged that the infection was caused by
one of various failures to take standard infection precautions
before, during, and after the operation or by perforation of
her bowel. In her Third Amended Petition, Plaintiff alleged a
res ipsa loquitur theory against Defendants on the basis that
an infection at the surgical site itself does not occur in the
absence of negligence. She claimed that the healthcare
providers had exclusive joint control, greater knowledge of
the possible causes of the infection, and that they infected
her. In reliance on Hasemeier v. Smith, 361 S.W.2d 697
(Mo. banc 1962) and Spears v. Capital Region Medical
Center, Inc., 886 S.W.3d 58 (Mo. App. 2002), Defendants
moved to dismiss, arguing that Plaintiffs could not proceed
on the theory of res ipsa loquitur and were required to
assert a specific negligence theory in a medical negligence
case. The trial court agreed, and the case was dismissed and
appealed. The Court of Appeals affirmed the trial court’s
dismissal.
Leiloni Popoalii sued 11 healthcare providers, including Dr.
Raymond Bloomquist, alleging that they negligently failed to
diagnose and treat her meningitis while she was in their care
between March 19 and July 2, 2004. Ms. Popoalii filed her
suit on July 31, 2006. The healthcare providers all moved
to dismiss the Petition on the grounds that it was barred by
the two-year medical malpractice statute of limitations,
section 516.105, RSMo. Subsequently, Ms. Popoalii filed an
Amended Petition alleging that Dr. Bloomquist changed his
residence from Missouri to Kansas in approximately
February 2006 and, therefore, section 516.200, which tolls
the statute of limitation as to a Missouri resident who moves
out of the state during the statute of limitations, prevented
Dr. Bloomquist from using the statute of limitations as a
defense. Dr. Bloomquist argued that the tolling statute was
unconstitutional as applied to him because it violated the
commerce clause. The Supreme Court held that section
516.200 applies only to a subclass of non-resident
defendants – those who became non-residents of Missouri
after the statute of limitations began to run and, thereby,
imposes a greater burden on the out-of-state defendant than
it does on resident defendants. As such, it burdens Dr.
Bloomquist’s ability to move from state to state, which
violates the commerce clause. Ms. Popoalii argued that
tolling was a reasonable restriction on interstate commerce
because it was harder to locate and serve an out-of-state
resident than service on a resident of Missouri. The Court
held that there was no showing by Ms. Popoalii that it was
difficult to find Dr. Bloomquist and added that she could
have filed suit against Dr. Bloomquist and then attempted to
locate him. Additionally, Dr. Bloomquist remained fully
amenable to a lawsuit under Missouri’s Long Arm Statute,
section 506.500, even after his change of residence.
Therefore, the Court held that the application of the tolling
provision of section 516.200 to persons who move their
residence out of Missouri is unconstitutional, thereby
barring Ms. Popoalii’s claim against Dr. Bloomquist.
The Supreme Court reversed and remanded the case. The
Missouri Supreme Court adopted the approach of the
Restatement (Second) of Torts, Section 238D, which allows
the use of an expert witness’ testimony to show that an event
usually does not occur without negligence. Further, the
Court added that, where a plaintiff is unable to show that a
specific act of negligence of the defendants caused his or her
injury, but is able to show (1) that all of the potential causes
were within the control or right to control of the Defendants
,and (2) the Defendants had greater access to knowledge of
the cause of the injury than the Plaintiff, and (3) a medical
expert testified that such an injury does not occur in the
absence of negligence of the Defendant, the Plaintiff has
made a prima facie case for medical malpractice. The Court
stated that, as in other types of res ipsa loquitur cases, this
doctrine simply allows a plaintiff who can show that the
injury does not occur in the absence of negligence to
present to the jury an inference that the defendants were
negligent. The defendants then can rebut that inference with
evidence that they were not negligent.
Trial – Jury Selection – Challenges for Cause
Joy v. Morrison, 254 S.W.3d 885 (Mo. banc 2008)
Plaintiff appealed a defense verdict in this medical
malpractice case on the sole ground that the trial court
improperly denied Plaintiff’s challenge for cause of venireperson
“Malpractice” >p3
~2~
Malpractice
claimed that Dr. Morrison failed to properly diagnose and treat his
sternal instability. The jury awarded Edgerton monetary damages,
and Dr. Morrison appealed.
Charles Shirkey. Mr. Shirkey made statements in voir dire to the
effect that, if a physician makes a mistake, one should just live with
the results, that he would probably be biased for the physicians, and
that he had strong negative feelings about the amounts of money
people sought to recover in lawsuits. However, he also claimed he
could put those feelings out of his mind, that he could be fair, and
he could award damages that he thought were fair and reasonable.
On appeal, Dr. Morrison raised two points of error relating to jury
instructions. Dr. Morrison first claimed that the trial court erred in
submitting a jury instruction because it failed to track Plaintiff’s
theory of the case. The instruction discussed treating the sternum
with “rigid fixation.” However, the term “rigid fixation” was not
defined within the jury instruction, nor was it defined in the
evidence at trial. The Southern District found that Plaintiff’s expert
never used “rigid fixation” at trial, and the jury could have considered
a rewiring of the sternum to be among methods capable of providing
a “rigid fixation.” The court stated that the instructions allowed for
a prejudicial roving commission by the jury and, therefore, the
judgment was reversed and remanded.
The Court of Appeals noted that the trial court had broad
discretion to determine the juror’s qualifications based on its ability
to observe the demeanor and credibility of prospective jurors. The
Court of Appeals held that the trial court had no duty to
independently voir dire Mr. Shirkey and did not abuse its discretion
in declining Plaintiff’s request to strike him from the panel.
On transfer to the Supreme Court, Plaintiff claimed that during voir
dire, Mr. Shirkey did not recant his strong feelings and biases
regarding lawsuits in general, nor was he rehabilitated by counsel on
those issues. The Supreme Court found that Mr. Shirkey stated that,
while he would have a problem awarding a substantial amount of
money, there was no specific amount that he thought was per se
excessive and, while he probably would be biased for the doctors,
he could be persuaded in the other direction. However, he also
conceded his opinions could affect his ability to listen to the experts
and give their testimony credence. On questioning by Defendants’
counsel, Mr. Shirkey admitted that, if he did find negligence, he
would be able to award damages in favor of Plaintiff and, if he did
not find negligence, he would be able to find in favor of the
physicians. He was also asked if he could be fair and unbiased if he
were selected for the jury, and he responded that he could be fair
and that neither side had a real advantage in his opinion. The
Supreme Court held that, while Mr. Shirkey may have expressed a
general feeling against excessive lawsuits, it was not clear that it
translated into a bias against Plaintiff. Additionally, mere
equivocation was not enough to disqualify a juror and, if the
challenged venireperson subsequently reassured the court that he
could be impartial, the bare possibility of prejudice would not
deprive the trial court of its discretion to strike the venireperson.
As such, the Court held that the trial court did not abuse it
discretion in failing to strike Mr. Shirkey for cause.
Dr. Morrison also attacked the verdict form that was submitted to
the jury. The verdict form, based on MAI 36.21, stated in pertinent
part, “On the claim of Plaintiff [Edgerton] for personal injuries
against Defendant [Dr. Morrison], as submitted by Instruction No.
11, we, the undersigned jurors, find in favor of, [Edgerton] or
[Morrison]. Dr. Morrison argued that the inclusion of the phrase
“as submitted by Instruction No. 11” constituted a deviation from
MAI 36.21 and, therefore, he was prejudiced. Plaintiff argued,
however, that the phrase was properly submitted as an identifying
phrase, as discussed under the notes section for use of MAI 36.21.
The notes provide that the verdict form will contain a descriptive
phrase describing and identifying the claim submitted by the
particular package which would be the claim to which the verdict was
applicable. The identifying phrase should be non-inflammatory and
as neutral as possible and should avoid the assumption of disputed
facts. The note also references MAI 2.01 for examples of
appropriate identifying phrases. The court concluded that MAI
2.01 recommends that it briefly describe in words the nature of the
claim and does not contain a reference to an instruction as used in
this case. The Southern District held that the tendered verdict form
already contained an identifying phrase consistent with the
examples listed in MAI 2.0 when it stated “on the claim of Plaintiff
for personal injuries against Defendant” and, therefore, the
deviation was unnecessary and erroneous, but the court did not
reach the question of whether the error was prejudicial.
Jury Instructions
Edgerton v. Morrison, et al., 2008 WL 4595367 (Mo. App. S.D.
October 16, 2008)
(from page 2)
Standing and Relation Back
This is a medical malpractice case in which the Plaintiff, Edgar
Edgerton, underwent cardiac bypass surgery, requiring Dr.
Morrison to cut Plaintiff’s sternum from bottom to top and then
rewire it after completing the bypass. During his post-operative
examination, Plaintiff complained of a rash at the surgical site and a
“gritting” feeling in his chest. Dr. Morrison found that Plaintiff’s
sternum was stable and referred him to a dermatologist. When
Plaintiff continued to have chest pains, he saw Dr. Morrison again,
who determined that his sternum was well healed. He subsequently
obtained a second opinion from Dr. Hugh Lundman, who diagnosed
Edgerton as having an unstable sternum that was possibly infected
and required an operation. During the operation, it was found that
his sternum had become necrotic and was destroyed. Plaintiff
~3~
Peyton v. Bellefontaine Gardens Nursing & Rehab, Inc.,
246 S.W.3d 914 (Mo. banc 2008)
Plaintiff, Sharon Peyton, sued a nursing home and several John Doe
Defendants to recover damages for the wrongful death of her
grandmother. Defendants moved to dismiss, arguing that Plaintiff
lacked standing under Section 537.080, RSMo, because she was
not within the class of persons entitled to bring the wrongful death
action since her mother, Mary Jo Williams, was alive and had
standing to sue. Plaintiff subsequently moved for leave to file a
Second Amended Petition naming her mother in the case caption as
“Mary Jo Williams, by and through Sharon Peyton, her Attorney In
“Malpractice” >p4
Malpractice
(from page 3)
Fact.” During this time, the three-year statute of limitations expired.
Therefore, the trial court overruled the motion to amend and
dismissed the case, stating that the court now lacked jurisdiction
over a case originally brought by one with no standing and that an
amendment to add or substitute a proper party could not relate
back to the original Petition so as to save the action once the statute
of limitations expired. Plaintiff contended, however, that she did
have standing as her mother’s attorney-in-fact so that the Second
Amended Petition related back to the time of the original filing.
evidence from Plaintiffs’ expert that indicated the expert was
forming his opinion according to the proper definition of
negligence. Upon reviewing the testimony as a whole, the Court
believed the expert’s opinion was specific to what a thyroid surgeon
should do when performing the thyroidectomy and the specific
reasons for the surgery. The expert’s opinion was not a vague
reference to the standard of care or what he perceived as his own
standard of care. As such, the verdict was affirmed.
Hospital Bylaws
The Supreme Court agreed with Peyton’s analysis under Rule
55.33(c) and therefore reversed and remanded. Specifically, if a
claim asserted in the amended petition arose from the same
occurrence set forth or attempted to be set forth in the original
pleading, the amendment relates back to the date of the original
pleading. The Court also cited Forehand v. Hall, 355 S.W.2d 940
(Mo. 1962), which sets forth the rule that, where a wrongful death
suit was timely filed by a party with a legal or beneficial interest, but
who lacked authority to maintain the suit for want of a court
appointment, the suit was safe from the running of the statute of
limitations by substitution of a Plaintiff suing in the proper capacity
because it related back to the original filing date. However, if the
party filing the original petition lacked the legal or beneficial
interest, then substituting the proper plaintiff does not relate back.
In this case, the Supreme Court believed that Peyton had a legal or
beneficial interest in the case because she was the attorney-in-fact
for her mother and, therefore, it should relate back to the original
filing date.
Defendants attempted to argue that the original and First Amended
Petition made no mention of Plaintiff’s status as an attorney-in-fact,
but the Court found that paragraph 5 of the original Petition stated
that notice was provided to the other surviving heirs and specifically
mentioned Ms. Williams. Since she was the attorney-in-fact for Ms.
Williams and notice had been provided to the Defendants of
Williams’ interest in the case, Plaintiff had a legal and beneficial
interest in the suit.
Expert Testimony
Hickman v. Branson Ear, Nose, and Throat, Inc., 256 S.W.3d
120 (Mo. banc 2008)
In this medical malpractice case, Plaintiff, Roger Hickman, alleged
negligence in the failure to remove his entire thyroid after finding a
mass. On appeal from a jury verdict in favor of Plantiff, Defendants
argued that Hickman failed to elicit expert testimony to define the
phrase “standard of care” so that the jury could be properly
informed of the meaning of the phrase. The Court of Appeals
reversed the verdict in favor of Plaintiff, announcing that the Plaintiff
failed to make a submissible case and noted that the definition of
negligence requires a showing of a deviation from the accepted
standard of care that other healthcare providers would use in the
same or similar circumstance. The standard must be objective and
could not be based upon the personal opinion of the expert.
The Missouri Supreme Court disagreed with the Court of Appeals’
ruling and determined that Plaintiffs made a submissible case
despite their failure to use the exact definition as set forth in the
MAI Instruction 11.06. The Court held that there was sufficient
~4~
Egan v. St. Anthony’s Medical Center, 244 S.W.3d 169 (Mo.
banc 2008)
This is a non-medical malpractice case in which the Plaintiff surgeon,
Dr. Robert Egan, had his privileges at St. Anthony’s Medical Center
suspended. Dr. Egan appealed the findings to an appellate
committee at the hospital which, according to St. Anthony’s bylaws,
was comprised of three members of St. Anthony’s Board of
Directors and three physicians selected by Dr. Egan. According to
the bylaws, the decision of the appellate committee was to be based
solely on the record from the evidentiary hearing. Dr. Egan alleged
that the appellate committee, however, heard new testimony
regarding his professional competence from at least one of its
members who testified that he himself was critical of Dr. Egan based
upon information he had heard at other hospitals and his own
personal interactions. Another physician on the committee objected
to the testimony for the reason that it was prejudicial and forbidden
by the bylaws. The committee chairman overruled the objection and
adopted the findings of the hearing committee.
Dr. Egan subsequently filed suit seeking injunctive relief and
reinstatement of his privileges pending a new hearing. In Cowan v.
Gibson, 392 S.W.2d 307 (Mo. 1965), the Supreme Court
previously addressed whether a physician could sue a private
hospital for revoking his staff privileges. According to Cowan,
under Missouri law, a private hospital’s decision regarding staff
privileges was not the subject of judicial review. Since Cowan, 46
states and the District of Columbia have adopted a limited
exception to this general rule. Additionally, Missouri adopted state
regulation 19 CSR 30-20.021, which mandates that all Missouri
hospitals adopt bylaws governing the professional activity of the
medical staff: “Bylaws of the medical staff shall provide for hearings
and appeal procedures for the denial of reappointment and for the
denial, revocation, curtailment, suspension, revocation, or other
modification of clinical privileges of a member of the medical staff.”
In this case, the Court determined whether and to what extent a
member of a hospital medical staff who is directly and adversely
affected by a hospital’s failure to abide by its own bylaws may sue
to enforce compliance with those bylaws. The Court ruled that Dr.
Egan could bring an action in equity for injunctive relief to compel
the hospital to substantially comply with its own bylaws before his
privileges were to be revoked. It explained that injunctive relief is a
less intrusive remedy. The Court further stated that it was not
holding that the bylaws create or are themselves an enforceable
contract between physicians and the hospital or that a breach of the
bylaws gives rise to an action for damages. The Court added that it
still
“Malpractice” >p5
Malpractice
believed that the final authority to make staffing decisions was
vested in the hospital’s governing body with the advice from the
medical staff, and it did not intend to create judicial oversight. As
such, the Court will not impose judicial review on the merits of a
hospital staffing decision, but only will act to ensure that substantial
compliance with the hospital bylaws occurs.
Tort Reform – Constitutional Challenge and
Verdict Reduction
Klotz v. St. Anthony’s Medical Center, St. Louis County Circuit
Court, Cause No. 06-CC4826
This medical malpractice cause of action was tried to a jury from
July 21, 2008 through July 30, 2008 in the Circuit Court of St.
Louis County, Missouri. Judge Barbara Wallace presided over the
trial. Named as Defendants were St. Anthony’s Medical Center, Dr.
Michael Shapiro, and Metro Heart Group. This cause of action
involves a complex procedural history. The Plaintiffs’ causes of
action arose in March 2004 when James Klotz was hospitalized.
Initially, James Klotz filed suit on December 14, 2004 against St.
Anthony’s Medical Center. On April 28, 2005, James Klotz’
Petition was amended to include Mary Klotz’ claim for loss of
consortium. On August 28, 2005, tort reform took effect. On
December 2, 2005, the Plaintiffs voluntarily dismissed their cause
of action without prejudice. Plaintiffs filed the Petition under which
the case was tried on December 4, 2006 against St. Anthony’s
Medical Center. This Petition subsequently was amended on March
1, 2007 to include Dr. Shapiro and Metro Heart Group.
The jury returned a verdict in favor of Plaintiffs and assessed 33%
of the fault to St. Anthony’s Medical Center and 67% of the fault
to Dr. Shapiro and Metro Heart Group. The jury awarded Mr.
Klotz’ past economic damages of $760,000, past non-economic
damages of $488,000, future medical damages of $525,000,
future economic damages of $22,000, and future non-economic
damages of $272,000 (for a total award of non-economic damages
in the amount of $760,000). Plaintiff Mary Klotz received an award
of past economic damages in the amount of $184,000, past noneconomic damages in the amount of $211,000, and future non-
(from page 4)
economic damages of $118,000 (for a total award of noneconomic damages in the amount of $329,000).
This case presented Judge Wallace with the issue of whether to apply
the benefit of the tort reform statutes to some, all, or none of the
Defendants. Plaintiffs claimed the non-economic damage caps were
unconstitutional, but Judge Wallace rejected this assertion. Judge
Wallace found that tort reform would apply to the claims against Dr.
Shapiro and Metro Heart Group, but not to the claims against St.
Anthony’s Medical Center. Essentially, Judge Wallace found that,
because a claim originally had been filed against St. Anthony’s
Medical Center before the tort reform statutes took effect, St.
Anthony’s Medical Center had notice of the claim and, therefore,
the filing of the Petition under which the case was tried “related
back” to St. Anthony’s initial notice of suit with the filing of the
December 14, 2004 Petition. Dr. Shapiro and Metro Heart Group,
on the other hand, did not have notice of any cause of action
Plaintiffs were asserting against them until after tort reform took
effect. Therefore, tort reform applied to the claims against Dr.
Shapiro and Metro Heart Group.
In applying the cap on non-economic damages, Judge Wallace first
applied the percentage of fault to the damages awarded. The
recovery against St. Anthony’s Medical Center fell below the pretort reform cap on non-economic damages and, therefore, there
was no reduction in the amount of this damages award. In applying
the post-tort reform non-economic damage cap to the award of
non-economic damages against Dr. Shapiro and Metro Heart
Group, Judge Wallace reduced the $350,000 cap to $234,500
(Dr. Shapiro and Metro Heart Group’s percentage of fault
multiplied by the amount of the damages cap). This resulted in a
past non-economic damage award to James Klotz in the amount of
$234,500 because the amount of past non-economic damages
awarded against these defendants exceeded the cap as applied by
Judge Wallace. Because the post-tort reform cap applies to the
entire case, rather than to each of Plaintiffs’ claims, Mr. Klotz did
not receive any future non-economic damages, and Ms. Klotz did
not receive any non-economic damages.
Missouri Organization of Defense Lawyers
Our Mission
Membership in the Missouri Organization of Defense Lawyers is
open to Missouri lawyers who devote a substantial amount of their
time to the representation of defendants and potential defendants
in civil litigation either as trial lawyers or as lawyers otherwise
directly involved with the defense of civil litigation.
Our Purpose
To take appropriate action where possible to insure that
defendants in our civil justice system receive fair and impartial
treatment by juries, the judiciary and the legislature;
~5~
To enhance the knowledge and improve the skill of its members;
To cooperate with other groups in promoting seminars, lectures
and other educational opportunities in matters of common legal
interest to the bar and/or the public;
To promote among all lawyers involved in civil litigation the
highest standards of professionalism and to encourage civility and
courtesy in the conduct of trials and related proceedings;
To develop collegiality and camaraderie among its members.
Current Issues in Preemption
by Roshan D. Shah Baker Sterchi Cowden &Rice, L.L.C. St. Louis, MO
Dylan Murray and Elizabeth Raines Baker Sterchi Cowden &Rice, L.L.C. Kansas City, MO
Two issues involving preemption, one percolating through the Missouri appellate courts and the other recently decided by the
United States Supreme Court, will impact the practices of defense counsel in Missouri. The first involves the question of whether
the Health Insurance Portability and Accountability Act of 1996 (HIPAA)1 preempts Missouri law permitting ex parte communications between defense counsel and a plaintiff’s health care providers. The second involves the United States Supreme Court’s recent
decision in Wyeth v. Levine,2 where the Court held that the Food and Drug Administration’s judgment regarding the appropriateness of warnings on prescription drug labels do not necessarily preempt state tort law claims.
HIPAA and Ex Parte Communications
In Brandt II v. Medical Defense Associates,3 the Missouri
Supreme Court held that, in personal injury actions, defense
counsel may engage in ex parte communications with a plaintiff’s
medical providers, as long as the provider consents and the communication concerns only the medical condition at issue. The
Brandt II court acknowledged that Missouri law recognizes the
physician-patient privilege.4 However, the court held, once a
patient puts his medical condition in issue by filing a lawsuit, the
privilege is deemed waived in full.5 Thus, Brandt II placed defense
counsel on equal footing with plaintiff’s counsel, who enjoy
unfettered access to plaintiff’s medical providers. Now, the equilibrium struck by Brandt II is in danger of being upset, as plaintiffs have asserted and some Missouri courts have ruled that
HIPAA preempts Brandt II.6
patient’s sensitive medical information.9 In response,
Congress “authorized the Secretary of the United States
Department of Health and Human Services (HHS) to
promulgate standards governing disclosure of [protected]
health information [(PHI)]10 in the event Congress did not
pass privacy legislation within three years of HIPAA's
enactment.”11
When Congress failed to act, the Secretary of HHS adopted
the federal Privacy Rule (“Privacy Rule”), which took effect in
April 2003.12 The Privacy Rule provides that a covered
entity (health care providers, health plans, and health care
clearinghouses) may only disclose PHI as permitted by the
regulations.13 Among the methods for disclosure permitted
by the regulations are: disclosures pursuant to a HIPAAcompliant medical authorization from the patient,14
The Federal Privacy Rule and HIPAA’s Disclosure
Provisions
disclosures during a judicial proceeding pursuant to a court
order,15 and disclosures during a judicial proceeding
pursuant to a subpoena, discovery request, or other lawful
process, so long as the covered entity has satisfactory
assurances the patient has been provided notice that such
disclosures are sought, or that a qualified protective
Congress enacted HIPAA in 1996 to increase access to
health care by, in part, reducing costs.7 The “cornerstone” of
HIPAA’s cost-reduction function was the adoption of the
electronic medical record.8 While Congress recognized the
benefits of the electronic medical record, it also recognized
the possible threat it posed to the dissemination of a
1
2
Health Insurance Portability and Accountability Act of 1996,
42 U.S.C. §§ 1320-d, et seq.
Wyeth v. Levine ,--- S.Ct. ----, 2009 WL 529172 (U.S. March
4, 2009).
3
Brandt II v. Medical Defense Associates, 856 S.W.2d 667,
674 (Mo. 1993).
4
Id. at 670.
5
Id. at 672-73 (“If a patient waives the privilege, it ceases to
exist. It may not be waived in part and retained in part.” (quoting Demonbrun v. McHaffie, 156 S.W.2d 923, 924 (1941)).
6
Currently pending before the Western District Court of Appeals
is the matter of State ex rel. Collins v. Hon. Marco Roldan, No.
70350 (Mo. App. W.D. filed Nov. 20, 2008) (preliminary writ
issued Feb. 3, 2009), which seeks to overturn the trial court’s
decision to prohibit ex parte communications between defense
counsel and the plaintiff’s health care providers in the context
of a medical authorization.
~6~
“Preemption” >p7
7
See Arons v. Jutkowitz, 9 N.Y.3d 393, 411 (N.Y. 2007).
8
Id. at 412.
9
See Id.
10
With certain exclusions, “[p]rotected health information
means individually identifiable health information” that is
transmitted by or maintained in electronic media or that is
transmitted or maintained in any other form or medium.
45 C.F.R. § 160.103.
11
Arons, 9 N.Y.3d at 412.
12
45 C.F.R. § 160 through § 164.
13
45 C.F.R. § 164.502(a).
14
45 C.F.R. § 164.502(a)(1)(iv).
15
45 C.F.R. § 164.512(e)(1)(i).
Preemption
that a qualified protective order16 has been sought by the party
seeking to communicate with the covered entity.17
(Continued from page 6)
Notwithstanding the fact that HIPAA does not mention, much less
prohibit, ex parte communications, plaintiffs have dogmatically
asserted that HIPAA preempts the Missouri Supreme Court’s ruling
in Brandt II. Plaintiffs in Missouri have principally relied on a twopronged approach to try to prevent defendants from obtaining a
court order or authorization that would effectively permit the
defendant to obtain PHI through ex parte communications with the
plaintiff’s health care providers: 1) Plaintiffs challenge the court
order or authorization sought as not complying with Missouri law;
and, 2) Even if the court order or authorization sought is found to
comply with Missouri law, plaintiffs argue that Missouri law
permitting ex parte communications with a plaintiff’s health care
providers is precluded and preempted by HIPAA. In making the
preemption part of this argument, plaintiffs have often paid little or
no attention to the threshold requirement that Missouri law must
be “contrary” to HIPAA in order to be preempted, instead
focusing almost entirely on an argument asserting that Missouri law
is not “more stringent” than (and is therefore preempted by)
HIPAA. As a result, defense briefing on the preemption issue
should focus first on the “contrary” threshold, emphasizing that
there is nothing in Missouri law concerning ex parte
communications with health care providers that makes it impossible
to comply with the provisions of the Privacy Rule or that stands as
an obstacle to the accomplishment of the full purposes of the
Privacy Rule.
HIPAA’s Express, Conflict-Based Preemption Clause
The Privacy Rule also contains an express, conflict-based
preemption clause, 45 C.F.R § 160.203, which mirrors the
preemption clause in the HIPAA statute, 42 U.S.C.A. § 1320d7(a). Section 160.203 provides for the preemption of any state law
that is contrary to HIPAA, except for those laws which are: 1)
designed to prevent fraud and abuse in health insurance plans, 2)
concern controlled substances, or 3) more stringent in protecting
patient privacy than HIPAA. Using this provision, plaintiffs are
urging the courts to find that, because ex parte communications
with plaintiff’s health care providers do not fall into one of the
three designated exceptions in Section 160.203, they are
preempted. These arguments, however, do not comport with
congressional intent or the plain language of HIPAA, which
establishes a two-part preemption analysis under which state law
must first be found to be “contrary” to HIPAA before the three
exceptions are even considered.
Missouri Law Is Not “Contrary” To HIPAA
An important feature of HIPAA’s express preemption clause is that
it only preempts state laws which are “contrary” to HIPAA.18 A
“contrary” state law is defined as one which would make it
“impossible [for the treating physician or other covered entity] to
comply with both the [s]tate and federal requirements,” or one
which “stands as an obstacle to the accomplishment and execution
of the full purposes and objectives” of HIPAA.19 Plaintiffs tend to
ignore the “contrary” threshold altogether and move straight to a
“stringency” analysis.
In making the preemption argument, plaintiffs have typically pointed
to and relied on a small number of decisions from other
jurisdictions where state law concerning ex parte communications
with health care providers has been found to be preempted by
HIPAA. However, these decisions have tended to involve a very
specific fact pattern that is not likely to be involved in a Missouri
case and are therefore highly distinguishable on that basis. Such fact
pattern involves the following: 1) Defense counsel who makes no
attempt to comply with HIPAA by seeking a court order or
authorization prior to contacting the health care provider; and 2)
A particular state law (statutory or common law) that specifically
authorizes or requires such ex parte communications even where
no court order or authorization has been obtained pursuant to
HIPAA.21 These decisions will typically be distinguishable because
the preemption issue has most commonly arisen in Missouri in the
context of defense counsel who have sought a HIPAA compliant
authorization or court order rather than ignoring HIPAA’s
requirements. Moreover, there is simply nothing in Missouri law
that authorizes defense counsel to violate HIPAA by engaging in ex
parte communications concerning PHI without first obtaining a
court order or authorization pursuant to HIPAA.22
It Is Not Impossible for A Health Care Provider to Comply
with The Privacy Rule And Engage in Ex Parte Communications
with Defense Counsel
The fact that Missouri law permits ex parte communications is in
perfect harmony with the Privacy Rule. First, the Privacy Rule does
not make any mention of ex parte communications, much less
prohibit them. Thus, it is difficult to see how a health care provider
acting in accordance with Missouri law could be violating a federal
law that does not exist. The Secretary of HHS has made a similar
observation: “What does one do when there is a State provision
and no comparable or analogous federal provision, or the converse
is the case? The short answer would seem to be that, since there is
nothing to compare, there cannot be an issue of a ‘contrary’
requirement, and so the preemption issue is not presented.”20
“Preemption” >p8
16
A qualified protective order means an order prohibiting the
requesting party from using the PHI for any purpose other
than the litigation in question, and requiring the party to
return to the covered entity, or destroy, any records containing PHI.
See § 164.512(e)(1)(v).
17
45 C.F.R. § 164.512(e)(1)(ii).
18
45 C.F.R. § 160.203; see also 42 U.S.C.A. § 1320d-7(a)(1).
19
45 C.F.R. § 160.202(1)-(2).
20
Standards for Privacy of Individually Identifiable Health Information,
64 Fed. Reg. 59,918, 59,995 (proposed Nov. 3, 1999) (to be
codified at 45 C.F.R. pts. 160 through 164).
21
See, e.g., Moreland v. Austin, 670 S.E.2d 68, 69-72, 284 Ga.
730 (2008); Law v. Zuckerman, 307 F.Supp.2d 705, 707-711 (D.
Md. 2004); Croskey v. BMW of North America, Inc., No.
02CV73747DT, 2005 WL 1959452, at *3-*5 (E.D.Mich. Feb.
16, 2005) (Magistrate’s decision, which was affirmed in part and
reversed in part, in Croskey v. BMW of North America, No.
02CV73747, 2005 WL 4704767 (E.D.Mich. Nov. 10, 2005)).
22
See, e.g., Brandt II, 856 S.W.2d at 662-63, 674.
~7~
Preemption
(Continued from page 7)
Conclusion
Because all drugs carry risks, some which are unknown despite
years of testing and clinical trials, the FDA’s function, in part, is to
accurately emphasize the risks and benefits a drug carries. The
agency must employ its scientific judgment to ensure that it does
not over-warn of risks and, thus, unnecessarily deter physicians
from prescribing the drug; and, simultaneously ensure it does not
under-warn of risks, thus luring physicians into prescribing a drug
which might not be appropriate for the patient.
Whether HIPAA preempts Missouri law permitting ex parte
communications will ultimately turn on the plain language of the
statute, and canons of statutory construction. However,
practitioners would be wise to remind courts of the stakes involved.
Ex parte communications allow defense counsel the same access to
plaintiff’s treating health care providers that plaintiff’s counsel
enjoys. This serves as an effective system of checks and balances —
ensuring that neither side is presenting biased or misleading
information to plaintiff’s treaters.
This delicate balance manifests itself in the form of the drug’s
warning label, the “centerpiece of risk management” by which the
FDA “communicates to health care practitioners the agency's
formal, authoritative conclusions regarding the conditions under
which the product can be used safely and effectively.”27 The FDA’s
final approval of a new drug is “conditioned upon the
[manufacturer] incorporating the specified labeling changes exactly
as directed [by the FDA].”28 A manufacturer’s label which fails to
comport exactly with the FDA’s specified label will be deemed false
or misleading, subjecting the manufacturer to legal action by the
government.29
Furthermore, ex parte communications allow defense counsel to
greatly reduce information costs — the time, energy, and money
expended to discover relevant information — by eliminating the
need to depose those health care providers who possess little or no
relevant information. This is especially true in complex medical
cases where a plaintiff has had numerous treating physicians.
Moreover, these cost-savings are realized not only by the
defendant, but also by the health care providers, who would
otherwise have to spend hours being deposed instead of treating
patients. Thus, ex parte communications do not provide a strategic
advantage for the defendants, but simply level the litigation playing
field.
The FDA permits two avenues by which a manufacturer may alter its
label: 1) prior approval supplements, which require FDA approval
before the manufacturer modifies the label, and 2) “changes being
effected” (CBE) supplements, which allow a manufacturer to
unilaterally strengthen its warning label, provided it notifies the
FDA.30 When a label change is implemented via CBE, the FDA will
review the submission and determine whether, in its judgment, the
scientific evidence supports such a change.31 If it rejects the
change, the manufacturer must reinstate the original label or face an
enforcement action.32 The CBE supplement was one of the issues
at the heart of Levine.
Wyeth v. Levine: Preemption of State Law
Claims Involving Prescription Medications
The blockbuster case of Wyeth v. Levine23 involved a relatively straightforward question: once the FDA, pursuant to its authority under the
Federal Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C.A. § 301 et
seq., has approved a prescription drug’s warning label, may a plaintiff
bring a claim under state law asserting that a different warning was
required to make the drug reasonably safe for use? In a 6-3 decision,
the United States Supreme Court held that, in certain circumstances, a
plaintiff may countermand the manufacturer’s warning label.24
Levine: Factual and Procedural History
Levine centers around Wyeth’s FDA-approved prescription drug
Phenergan, an antihistamine used to treat nausea.33 In 2000,
Phenergan’s FDA-approved label provided that the drug could be
injected either via intramuscular or intravenous injection, including
both intravenous drip (IV drip) and intravenous push (IV push).34
However, the label warned health care providers that, when using
the intravenous method of injection, there was a risk of inadvertent
injection into the arteries, which could cause gangrene and,
ultimately, lead to amputation.35 In 1996, the FDA rejected
Wyeth’s attempt to modify Phenergan’s warnings regarding
intravenous injection, instructing it to “[r]etain verbiage in current
label.”36
“Preemption” >p9
The Role of the FDA in Regulating Prescription Drugs
The FDCA mandates that the FDA protect the public health by
ensuring that drugs are safe and effective, and that their labels
adequately inform physicians of the risks and benefits of the
product without providing false or misleading information.25 To
fulfill this mandate, the FDA considers complex clinical studies, the
“important and practical public health issues pertaining to the use
of the product in day-to-day clinical practice,” and the “need for
risk management measures to help assure[,] in clinical practice[,]
that the product maintains its favorable benefit-risk balance.”26
23
Levine, No. 06-1249, 2009 WL 529172 (U.S. March 4, 2009).
24
Id. at *9.
25
21 U.S.C.A. § 393(b); see also Requirements on Content and Format of Labeling for Human Prescription Drug and Biological Products, 71 Fed. Reg. 3,922, 3,934 (January 24, 2006) (codified at
21 CFR pts. 201, 314, and 601).
26
71 Fed. Reg. at 3,934.
27
Id.
28
Levine v. Wyeth, 944 A.2d 179, 185 (Vt. 2006).
29
See generally U.S. v. Guardian Chemical Corp., 410 F.2d 157 (2nd
Cir. 1969); see also 71 Fed. Reg. at 3,935.
30
71 Fed. Reg. at 3934.
31
Id.
32
Id.
33
Levine, No. 06-1249, 2009 WL 529172, at *2.
34
Id.
35
Id. at *2 n.1.
36
Id. at *3.
~8~
Preemption
On April 7, 2000, plaintiff Diana Levine, a guitarist, visited
Northeast Washington County Community Health, Inc. (the
“Health Center”) and received two injections of Phenergan for the
treatment of nausea caused by migraine headaches.37 The first
injection was administered via intramuscular injection.38 When the
first injection failed to alleviate her symptoms, plaintiff received an
intravenous injection via the IV push method.39 Unfortunately,
Phenergan entered an artery, causing gangrene and, eventually,
required the amputation of plaintiff’s forearm and hand.40
With regard to Wyeth’s impossibility defense, the Court
acknowledged that generally, “a manufacturer may only change a
drug label after the FDA approves a supplemental application.”49
The Court observed, however, a manufacturer could avail itself of
the CBE supplement and unilaterally strengthen its warning label,
pending approval by the FDA. 50 The Court rebuffed Wyeth’s
interpretation of the CBE supplement, which provided that a
warning could be strengthened via CBE supplement only to reflect
“newly acquired information” regarding the risk.51 According to the
FDA’s notice of final rule, “newly acquired information”
encompassed not only new data, but also “‘new analyses of
previously submitted data.’”52 The majority found significant 20
reported events in which a Phenergan injection resulted in gangrene
and, ultimately, amputation.53 The first incident came to Wyeth’s
attention in 1967 and, subsequently, Wyeth worked with the FDA
to modify its label to reflect the risk.54 “In later years, as
amputations continued to occur, Wyeth could have analyzed the
accumulating data and added a stronger warning about IV-push
administration of the drug.”55 If the FDA disagreed with the
stronger warning, the Court noted, it would reject it.56
Plaintiff filed suit against Wyeth, alleging failure-to-warn under
theories of negligence and strict-liability.41 Plaintiff’s claims were
premised on the theory that Phenergan’s label should have
instructed physicians to use the IV-drip method as opposed to the
IV push method or, more broadly, that Phenergan is not reasonably
safe for any type of intravenous administration because the risk of
gangrene outweighs any therapeutic benefits.42 The jury agreed,
finding Phenergan’s warning regarding IV push administration was
inadequate and entered a verdict against Wyeth for $7.4 million.43
Wyeth appealed the verdict to the Vermont Supreme Court, arguing
the trial court erred in instructing the jury regarding damages and
in failing to dismiss the claims on the basis that the FDA’s approval
of Phenergan’s label impliedly preempted state tort law.44 The court
denied Wyeth’s appeal on all counts,45 prompting Wyeth to
petition the United States Supreme Court for a writ of certiorari,
which was granted.46
The Court found unpersuasive Wyeth’s arguments that the FDA’s
1996 rejection of its proposed warning label, which sought to
modify the warning regarding intravenous injection, was an
affirmative decision by the FDA to reject a stronger warning
regarding IV push administration.57 The Court’s rationale turned
on an issue of fact—specifically, whether, in rejecting the label, the
FDA considered the narrow question of whether a stronger warning
for IV push administration needed to be added, as opposed to the
broader question of whether a stronger warning was needed for all
intravenous injections. The Court relied on the conclusions of the
Vermont courts, which found that “the FDA had not made an
affirmative decision to preserve the IV-push method [n]or intended
to prohibit Wyeth from strengthening its warning about IV-push
administration.”58 The majority also found significant the United
States’ concession that the rejection was based on format, not
The United States Supreme Court Rejects Preemption In Levine
Wyeth laid before the Court two arguments for finding implied
preemption: 1) it would have been impossible for Wyeth to comply
with the state-law duty to strengthen Phenergan's label regarding IV
push administration and also comply with the FDA’s labeling
requirements (“impossibility defense”), and 2) state tort actions
are an obstacle to the accomplishment and execution of the full
purposes and objectives of Congress, “because [they] substitute[]
a lay jury's decision about drug labeling for the expert judgment of
the FDA.”47 The Court rejected both arguments.48
37
(Continued from page 8)
“Preemption” >p10
Id. at *2.
49 Id. at *7.
Id. at *7.
Id.
50
39
Id.
51
40
Id.
41
Id.
Id. Although this limit on the use of the CBE supplement was not
formally adopted until 2008, Wyeth argued the formal adoption
simply re-affirmed the rule in effect at the time the injury occurred.
Id.
42
Id. at *2.
52
43
Levine v. Wyeth, 944 A.2d 179, 182 (Vt. 2006). The verdict was
reduced to $6,774,000 to account for prejudgment interest and
plaintiff’s recovery in a settlement with the Health Center. Id. at
182-83.
Id. (quoting Supplemental Applications Proposing Labeling Changes
for Approved Drugs, Biologics, and Medical Devices, 73 FR
49,603, 49,604 (August 22, 2008) (to be cofidied at 21 CFR
Parts 314, 601, and 814)).
53
Levine, No. 06-1249, 2009 WL 529172, at *8.
44
Id. at 183.
54
Id.
45
Id. at 197.
55
Id.
46
Wyeth v. Levine, 128 S.Ct. 1118, 169 L.Ed.2d 845 (2008).
56
Id. at *9.
47
Levine, No. 06-1249, 2009 WL 529172, at *5. (internal citations
and quotations omitted).
57
Id.
58
Id. at *9 (citing Levine, 944 A.2d at 188-89).
38
48
Id. at *13.
~9~
Preemption
(Continued from page 9)
substance.59 Thus, finding that Wyeth could have strengthened its
warnings regarding the IV push administration via the CBE
supplement, the majority held it was possible for Wyeth to comply
with the labeling requirements imposed by the Vermont jury, as well
as the labeling requirements mandated by the FDA.60
The Court rebuked the FDA’s “dramatic change in position” on the
subject, finding that the agency’s prior statements contradicted its
current position.71 Significant was that the FDA had previously
“cast federal labeling standards as a floor upon which States could
build and repeatedly disclaimed any attempt to pre-empt failure-towarn claims.”72 Thus, based on the absence of evidence that
Congress intended the FDCA to preempt state law, and the zero
deference given to the FDA’s position, the Court concluded that
state tort actions do not stand as an obstacle to the
accomplishment and execution of the full purposes and objectives
of Congress.73 Finding both of Wyeth’s arguments in favor of
preemption to be meritless, the Court affirmed the decision of the
Vermont Supreme Court.
The Court also declined to find that state-law tort suits are an
obstacle to the accomplishment and execution of the full purposes
and objectives of Congress.61 The Court concluded Wyeth’s
argument — that in passing the FDCA, Congress intended an FDAapproved label to serve as a ceiling regarding risk warnings — was
diametrically opposite to the evidence of Congress’ purpose.62
The Court found significant that Congress did not enact an express
preemption provision during the 70-year history of the FDCA.63
“[Congress’] silence on the issue, coupled with its certain
awareness of the prevalence of state tort litigation, is powerful
evidence that Congress did not intend FDA oversight to be the
exclusive means of ensuring drug safety and effectiveness.”64
Buttressing this conclusion was the fact that the first version of the
bill that eventually became the FDCA included a federal cause of
action for injured consumers.65 “Evidently,” the provision was
removed after witnesses testified before the Subcommittee of the
Senate Committee on Commerce that the provision would be
duplicative, as common law claims were already available under state
law.66 The Court also pointed to the fact that in 1976 and 1997,
respectively, Congress preempted state tort law concerning medical
devices, as well as certain state requirements regarding cosmetics
and over-the-counter medications, but expressly preserved product
liability actions.67
The Post-Levine World
For defense counsel, the silver lining in Levine’s cloud is that the
Court has not ended the battle over preemption, it has simply
shifted the battlefield. Central to the majority’s rejection of Wyeth’s
impossibility defense was Wyeth’s ability to avail itself of the CBE
supplement to unilaterally strengthen its warnings.74 However, the
majority recognized that the CBE supplement would not be available
under a different factual record — one demonstrating “clear
evidence” that the FDA had given the specific risk at issue “more
than passing attention” and/or “made an affirmative decision” that
additional or stronger warnings regarding the risk would be
inappropriate.75 While the Court found the factual circumstances
surrounding the FDA’s 1996 rejection of Wyeth’s modified label to
be lacking in this respect, presumably in instances where such a
factual record is present, the impossibility defense would bar
plaintiff’s failure-to-warn claim.76 Thus, defense counsel must
develop a strong factual record demonstrating that the FDA
considered and rejected a stronger warning regarding the specific
risk in question.
Moreover, the Court found unconvincing Wyeth’s reliance on a
2006 preamble to an FDA regulation governing the content and
format of prescription drug labels. The preamble declared that the
FDCA establishes “both a ‘floor’ and a ‘ceiling,’” so that “FDA
approval of labeling . . . preempts conflicting or contrary State
law.”68 The Court reiterated the general rule that, absent delegation
by Congress, an agency has no authority to conclude that state law
was preempted.69 Such a determination was reserved to the courts,
which must look at the substance of state and federal law.70
Eventually, as the law develops in the lower courts, the impossibility
defense may evolve into an affirmative defense. Potentially, a jury
could find the warning in question inadequate, and also find that the
FDA rejected an additional and/or stronger warning. In such cases,
the former finding would be preempted by the latter.77
“Preemption” >p11
59
Id. at *9 n.5.
70
See Id.
60
Id. at *9.
71
Id. at *12.
61
Id. at *10.
72
Id.
Id.
73
Id. at *13.
63
Id.
74
64
Id.
65
Id. at *10 n.7.
Id. at *9 (“Wyeth has failed to demonstrate that it was impossible
for it to comply with both federal and state requirements . . . [t]he
CBE regulation permitted Wyeth to unilaterally strengthen its warning . . .”).
66
Id.
75
Id.
67
Id. at *10; Id. at *10 n.8 (citing 21 U.S.C. §§ 379r(e), 379s(d)
(“Nothing in this section shall be construed to modify or otherwise
affect any action or the liability of any person under the product liability law of any State”)).
76
68
Id. at *10 (quoting 71 Fed.Reg. at 3,934-3,935).
Id. at *9 n.5 (noting the factual finding of the Vermont trial court
and the Vermont Supreme Court that the label the FDA rejected in
1996 did not materially differ from the FDA-approved label in use,
and citing the United States’ concession that the rejection was
based on format, not substance).
69
Levine, No. 06-1249, 2009 WL 529172, at *11.
77
See Id. at *9.
62
~ 10 ~
Preemption
Finally, in tightly circumscribing its rationale around the factual
record and Congressional intent, the majority never considered the
more fundamental proposition posed by Levine: Who is best-suited
to regulate prescription drugs — an expert agency created by
Congress and dedicated to analyzing scientific literature, weighing
the risk and benefits of a particular drug, and adopting the optimal
warnings or 12 lay jurors without such training? A “juror
regulatory body,” which will not convene until after there is an
injury, is less-equipped to weigh the risks and benefits of
prescription drugs, which are “complex medicines, esoteric in
formula and varied in effect.”78 As Justice Scalia stated in Riegel v.
Medtronic, Inc., a case where the Court upheld preemption of state
law claims against medical device manufacturers, “[a] jury . . . sees
only the cost of a more dangerous design, and is not concerned
with its benefits; the patients who reaped those benefits are not
represented in court.”79 This debate will continue for the
foreseeable future.
inadequate warning; that is, plaintiff believed the warning should
have been stronger.80 This is a claim that can be “manufactured”
time and again — if the warning is provided in the adverse event
profile, the plaintiffs argue it should have been prominently
displayed in the black box; if the warning was displayed in the black
box, plaintiffs argue the drug should have been contraindicated for
the patient profile in question; if the word “slight” was used to
describe the risk, the word “moderate” should have been
substituted, etc. It is a never-ending saga, one that increases the
cost, and thus the price, of drugs, but has not been shown to make
them safer. Levine represented an opportunity for the Court to end
the saga. For now, the defense will settle with developing a
preemption defense within the confines of Levine — by presenting
evidence that the FDA considered and rejected the specific risk in
question.81
Conclusion
The argument for FDA preemption was not borne out of a desire
for deregulation of the pharmaceutical industry, as critics
suggested. Rather, preemption was about centralized regulation. It
is important to note that Levine did not involve a true failure to
warn — the label warned against the risk of intra-aterial injection of
Phenergan and resulting gangrene — but rather involved an alleged
(Continued from page 10)
78
Jones v. Minnesota Min. and Mfg. Co., 100 N.M. 268, 284 (N.M.
Ct. App.1983).
79
Riegel v. Medtronic, Inc., 128 S.Ct. 999, 1008, 169 L.Ed.2d 892
(2008).
80
Id. at *2 n.1.
81
Id. at *9.
Medicare and Medicaid Liens –
An Overview and Update for Defense Counsel
by Christine A. Vaporean Brown & James, P.C. St. Louis, MO
The existence of a Medicare or Medicaid lien can lead to postsettlement or post-judgment litigation if it is not properly
addressed before payment on a case is made. Recent changes in
the law regarding liens affect negotiations and settlements. This
article provides an overview of the existing law, including the
recent changes to Medicare and Medicaid liens and recommendations for addressing liens in the context of litigation and settlement.
Overview of Medicare and Medicaid Liens
In an effort to prevent the depletion of the Medicare Trust Fund
established in 1965, Congress enacted the Medicare
Secondary Payer Act as a component of the Consolidated
Omnibus Reconciliation Act of 1980 (COBRA) and the
Medicare Prescription Drug Act of 2003. These laws give the
United States a right to recover from a third party any monies
paid by Medicare for health care services of a plaintiff when the
health care services were related to the third party’s liability to
the plaintiff-beneficiary. In 2007, Congress enacted The
Medicare, Medicaid, and SCHIP Extension Act of 2007
(MMSEA), which imposes new, affirmative obligations on
primary payers to notify Medicare of an interest it may have in
~ 11 ~
a lawsuit. In combination, these laws require that any Medicare
lien be satisfied before any other payment on a case is made.
The Medicare Set Aside Trust, 42 USC 1395y(b)(2), also
provides a set-off for future Medicare payments following a
worker’s compensation settlement. The Set Aside Trust
provisions will not be covered in this article, but defense
counsel should be aware they exist and may impact settlements
in certain cases. Additional information on the Set Aside Trust
can be found on the Centers for Medicare and Medicaid
Services (CMS) website, www.cms.hhs.gov. Finally, it is
anticipated that the American Recovery and Reinvestment Act
of 2009 (the stimulus bill) will further enhance Medicare’s right
of recovery against primary payers over the next three to five
years. The effect has not yet been determined by the current
administration.
By statute, Medicare’s right of recovery attaches automatically
with the payment for health care services. Thus, the Medicare
lien is often called a “super-lien.” Glenn A. Bradford, Liens,
Assignments, Subrogation and other Traps for the Claimant’s
Medicare and Medicaid Liens >p12
Medicare and Medicaid Liens
(Continued from page 11)
Lawyer, 53 J. Mo. B. 248 (1997) and Glenn A. Bradford, The
Medicare Lien Revisited, 56 J. Mo. B. 44 (2000). Federal law makes
clear that failure to satisfy these liens with the proceeds of a
settlement or judgment can result in significant penalties for a
defendant or its insurer, including having to pay for the medical
expenses twice, paying double damages to Medicare in an action to
recover on the lien, and the payment of interest on the lien amount.
Missouri law contains similar provisions regarding the state
counterpart to Medicare, Missouri Medicaid, now called MO
HealthNet.
MEDICARE
Laws Establishing the Lien
In general, Medicare provides health insurance coverage to persons
over age 65, persons under age 65 who are disabled, and to
persons with end-stage renal disease. To protect the government
from becoming the primary health insurer for this population in all
circumstances and thus depleting resources, the Medicare laws
provide certain exceptions to coverage. Of interest are the
provisions which establish Medicare as a Secondary Payer.
In the event a covered individual obtains medical care which is also
covered by a workers compensation law, an automobile or liability
insurance policy or a policy of no fault insurance, Medicare will
generally not make a payment. 42 U.S.C. § 1395y(b)(2)(A)(ii). The
law does allow payment “if a primary plan … has not made or
cannot be reasonably expected to make payment with respect to
such item or service promptly.” 42 U.S.C. § 1395y(b)(2)(B)(i). If
a payment is made under this section, the primary plan (i.e. the
worker’s compensation, liability, automobile or no-fault insurer)
“shall reimburse the appropriate [Medicare] Trust Fund for any
payment made by the Secretary … if it is demonstrated that such
primary plan has or had a responsibility to make payment.” 42
U.S.C. § 1395y(b)(2)(B)(ii). Payments under this section are called
“conditional payments.” Responsibility of a primary plan payer
(“primary payer”) to make a payment can be demonstrated by a
judgment, a payment conditioned on settlement (regardless of
whether liability is admitted), “or by other means.” Id. “By other
means” includes contractual obligations or those imposed by a
recovery demand letter. 42 C.F.R. § 411.22. The Eighth Circuit
also recently held that Medicare’s right of reimbursement extends
to medical expenses recovered in wrongful death actions. Mathis, et
al. v. Leavitt, Opinion No. 08-1983, January 30, 2009,
2009WL211944.
Enforcement Provisions
The United States is authorized to bring an action to recover
conditional payments “against any or all entities that are or were
required or responsible (directly, as an insurer or self-insurer, as a
third-party administrator, as an employer that sponsors or
contributes to a group health plan, or large group health plan, or
otherwise).” 42 U.S.C. § 1395y(b)(2)(B)(iii). The United States
may collect double damages against any such entity and recover
“from any entity that has received payment from a primary plan or
from the proceeds of a primary plan’s payment to any entity.” Id.
The United States also has a subrogation right to the extent of the
~ 12 ~
conditional payment amount on behalf of an individual and against
a primary payer. 42 U.S.C. 1395y(b)(2)(B)(iv). Thus, not only
does the United States have a lien, it may enforce the lien against
an insurer (including self-insured entities) and anyone who receives
payment from an insurance policy. This includes health care
providers, plaintiffs, plaintiff’s counsel, insured defendants, and
potentially defense counsel to the extent defense counsel are
compensated pursuant to the same insurance policy which makes a
payment to a plaintiff. Research by the authors revealed no cases in
which Medicare sought reimbursement from defense counsel. The
right of subrogation allows Medicare to assert its lien whether or
not the beneficiary asserts a claim.
42 C.F.R. § 411.20 et seq. establish the procedure for recovery of
conditional payments. 42 C.F.R. § 411.23 requires a beneficiary to
cooperate with Medicare in any action to recover conditional
payments. Medicare has a direct right of action against primary
payers. 42 C.F.R. § 411.24(e). If an insurer imposes a time limit
for filing a claim, the time limit does not apply to Medicare;
however, in the face of such a limitations periods, the claim for
reimbursement must be asserted by Medicare by the end of the year
following the year in which the primary payer has notice that it is
the primary payer, wherein notice received during the last three
months of a year is considered received in the following year. 42
C.F.R. § 411.24(f). If no such claims-filing requirement exists, the
statute of limitations for an action to recover conditional payments
is six years. 28 U.S.C. § 2415(a).
Medicare has a right to recover from any entity that has received a
payment, including a Medicare beneficiary, provider, supplier,
physician, attorney, State agency or primary insurer. 42 C.F.R.
§ 411.24(g). In the case of liability insurance settlements and
disputed claims under workers compensation or no-fault insurance,
if Medicare is not reimbursed within sixty (60) days of the
beneficiary receiving a payment, the primary payer must reimburse
Medicare even though it has already reimbursed the beneficiary
or other party. 42 C.F.R. § 411.24(i)(1). The provisions of this
section apply if payment is made to an entity other than Medicare
when the primary payer is or should be aware that Medicare has
made a conditional payment.
If reimbursement to Medicare for a conditional payment is not
made within sixty days of notice of responsibility for such payment,
interest will accrue. 42 U.S.C. § 1395y(b)(2)(B)(ii). The interest
allowable under this section accrues until reimbursement is made.
42 C.F.R. § 411.24(m)(2)(ii). Interest is applied for full thirty-day
periods. Id. The interest rate is determined pursuant to provision
set forth in 42 C.F.R. § 405.378(d).
The amount of reimbursement due is determined by whether
Medicare must initiate an action to recover payments. Pursuant to
42 C.F.R. § 411.24(c), if no such action is required, the amount of
reimbursement due is the lesser of either a) the amount of the
Medicare payment; or b) “the full primary payment amount that the
primary payer is obligated to pay under this part without regard to
any payment, other than a full primary payment that the primary
Medicare and Medicaid Liens >p13
Medicare and Medicaid Liens
payer has paid or will make, or, in the case of a primary payment
recipient, the amount of the primary payment.” If an action for
recovery is instituted, Medicare may recover twice the amount of
its payment. 42 C.F.R. § 411.24(c)(2).
42 C.F.R. § 411.37(a) mandates that as a general rule, Medicare
must reduce its recovery to account for the costs of procuring the
judgment or settlement which gives rise to the right to recover
conditional payments if procurement costs are incurred and those
costs are borne by the party against whom recovery is sought. If
Medicare must file suit against a primary payer, the recovery
amount is calculated pursuant to 42 C.F.R. § 411.37(b). In general,
the costs to procure a judgment or settlement are apportioned
between Medicare and the claimant based on the ratio of the lien to
the total award or settlement. 42 C.F.R. §§ 411.37(c) – (e).
The Medicare lien which results from a conditional payment may be
compromised and settled if the claim is not more than $100,000.
31 U.S.C. § 3711(a)(2). Claims in excess of $100,000 are to be
handled by the Department of Justice. 31 C.F.R. § 902.1. The
factors considered by Medicare when comprising a claim include:
the debtor’s inability to pay; the government’s inability to collect
payment promptly; the costs of collections versus the full amount
of the debt; and the existence of doubt as to the government’s
ability to prove its case. 31 C.F.R. § 902.2(b). If the claim does not
exceed $100,000 and can be resolved by Medicare, the authority
to compromise a claim lies in the CMS Regional Office. “Medicare
Second
Payer
Manual,”
available
at
the
CMS
website:www.cms.hhs.gov.manuals/downloads/msp/105c07.pdf; 31
U.S.C. § 3711; 42 C.F.R. § 405.405(d). A party wishing to
compromise a claim must inform the Regional Office of their intent.
Id.
Notice Requirements
Upon learning that Medicare made payments which were likely
conditioned on reimbursement, a third party must provide notice to
Medicare of its status as a primary payer.
42 C.F.R. § 411.25(a). Medicare has no duty to notify third parties
of the lien; it exists as long as the third party knew or should have
known of its existence. 42 C.F.R. § 411.24(i)(2).
Effective July 1, 2009, the requirements that a liability, no-fault or
workers compensation insurer (a non-GHP primary payer) notify
Medicare of the primary payer’s responsibility to reimburse
Medicare will become more comprehensive and stringent. In
December 2007, The Medicare, Medicaid, and SCHIP Extension
Act of 2007 (MMSEA) was enacted as Public Law 110-173. The
relevant portions of this Act (Section 111) were codified 42 U.S.C.
§ 1395(y)(b)(8). This section requires non-GHP insurers: a) to
determine whether a claimant, including a person whose claim is
unresolved, is entitled to benefits under the program; and if a
claimant is so entitled, b) to submit the claimant’s identity and
other information necessary to allow the Secretary of Health and
Human Services to make a determination regarding the coordination
of benefits, “including any applicable recovery claim.” 42 U.S.C.
§ 1395(y)(b)(8)(A) and (B). Thus, this law now requires all
categories of primary payers to identify individuals for whom
~ 13 ~
(Continued from page 12)
Medicare has made a payment for which Medicare might be eligible
to be reimbursed and to promptly notify Medicare of its right to
reimbursement. Failure of a “Responsible Reporting Entity”
(“RRE”) to comply with this section carries a penalty of $1,000 per
day. 42 U.S.C. § 1395(y)(b)(8)(E).
42 C.F.R. § 411.25(b) requires insurers to describe the
circumstances of their primary payment responsibility, including the
particular type of insurance coverage and the time period for which
coverage applies. It further provides additional reporting
requirements can be imposed by the CMS Regional Office managing
the particular claim. CMS has exercised that authority.
CMS has issued multiple rules and notices regarding the
implementation of MMSEA. The MMSEA implementing regulations
generally divide MSP into “pre-payment” and “post-payment”
activities. Prepayment activities are intended to stop Medicare from
mistakenly making primary payments when it should be the
secondary payer. Post-payment activities are designed to recover
mistaken or conditional payments when a liability insurer (including
self-insurer), no-fault insurer or workers compensation plan settles
a case or makes a payment pursuant to a judgment or award. The
MMSEA provisions mandate that Required Reporting Entities
(“RRE’s”) provide data to CMS’ Coordination of Benefits
Contractor (COBC). “Supporting Statement for the Medicare
Secondary Payer (MSP) Mandatory Insurer Reporting Requirements
of Section 111 of the Medicare, Medicaid, and SCHIP Extension
Act of 2007”, available at www.cms.hhs.gov/mandatoryinsrep/. All
reporting under this program will be electronic. Id. RRE’s are
required to register with COBC through a secure website. Id. Once
registered, the RRE will have a data reporting regimen. Data
collection frequency will be no more than quarterly. Id. No-fault
insurers and workers compensation plans for non-contested claims
will have to report data on an ongoing basis. Id. For non-GHP
RRE’s involved in contested claims, the reports will be made on a
one-time basis where a single settlement, judgment, award or other
payment is made. Id.
The Mandatory Insurer Reporting Requirements also outline the
specific information which must be provided by the non-GHP
RRE’s. This information includes: the identity of the injured party
including specific identifying information; the identity of the
claimant, if different from the injured party; information on the
primary plan, including type of insurance and other specific data;
the identity of the policy holder; the identity of the injured party’s
attorney; information regarding the incident giving rise to the claim;
and the manner of resolution of the claim, including how a
settlement or judgment is funded. Id. at Attachment D, NGHP Data
Elements.
Thus, the new rules implemented pursuant to MMSEA require that
insurers report every payment they make to a plaintiff on a case and
provide sufficient information that allows CMS to track down and
recover the monies which should have gone to satisfy its lien. These
new rules make it virtually impossible to “fly under the radar” and
fail to satisfy a Medicare lien in the future, to the extent anyone was
inclined to do so.
Medicare and Medicaid Liens >p14
Medicare and Medicaid Liens
(Continued from page 13)
reimburse the department of social services … from the proceeds
of any settlement, judgment, or other recovery …. A judgment,
award, or settlement in [such] an action may not be satisfied
without first giving the division notice and a reasonable
opportunity to file and satisfy the claim or proceed with any
action as otherwise permitted by law.” § 208.215.6, RSMo. The
authors have found no Missouri cases wherein a satisfaction of
judgment or settlement was held void due to failure of the plaintiff
to give MO HealthNet notice of the impending payment.
MEDICAID
Medicaid is a state-level program supported in part by federal funds
and created with the Social Security Act of 1965 to provide health
care services for the needy. Missouri’s version of Medicaid is known
as MO HealthNet. § 208.001.2, RSMo. MO HealthNet statutes are
codified at § 208.001, RSMo et seq. The federal statutory basis for
state Medicaid programs is codified at 42 U.S.C. § 1396, et seq.
Laws Establishing the Lien and Notice Requirements
Like their federal counterpart, MO HealthNet laws contain
provisions mandating reimbursement if a beneficiary recovers from
a third party tortfeasor for an injury, disease or disability for which
MO HealthNet has paid benefits. Federal law requires states to
determine the legal liability of third parties toward payment for
services rendered under the State’s Medicaid plan and to seek
reimbursement for medical assistance to the extent of such legal
liability. 42 U.S.C. § 1396a(a)(25)(A) and (B). Section
1396a(a)(25)(H) gives the State the right to payment by any other
party for health care items or services paid by the state.
Enforcement Provisions
Missouri law dictates that MO HealthNet be a payer of last resort.
§ 208.215.1, RSMo. Liability of “any person, corporation,
institution, public agency or private agency” to a MO HealthNet
participant for personal injury, disability or disease payments made
by MO HealthNet is a debt due the state and is recoverable from
the liable party or the MO HealthNet participant. Id. The debt due
the state shall not exceed the payments made by MO HealthNet. Id.
Unlike Medicare laws, workers compensation plans are excepted
from the MO HealthNet recovery provisions. § 208.215.13,
RSMo.
Any plaintiff pursuing a claim involving injuries, disease or disability
for which MO HealthNet has made a payment must promptly notify
MO HealthNet of the pursuit of such a claim. § 208.215.3, RSMo.
MO HealthNet applicants automatically assign their rights of
recovery against a third party for funds expended by MO HealthNet
to the Department of Social Services. § 208.215.4, RSMo.
Participants are required to cooperate with MO HealthNet in
pursuit of third parties who may be liable to pay for care and
services covered by MO HealthNet. Id. A recipient who has notice
of MO HealthNet’s right to third-party benefits and who directly
receives a payment by the third party must pay MO HealthNet the
full amount of the third-party benefits up to the amount of the lien
or place the full amount of the third-party benefits in a trust account
for the benefit of MO HealthNet pending judicial or administrative
determination of MO HealthNet’s right to reimbursement. Id.
Any person acting on behalf of a MO HealthNet beneficiary in
pursuit of a claim which accrued as a result of a non-work related
incident and which resulted in a payment for services by MO
HealthNet must notify MO HealthNet upon agreeing to assist with
the claim, and further must notify MO HealthNet of the result of
the claim. § 208.215.5, RSMo. The plaintiff’s attorney must give
thirty days' notice before any judgment, award, or settlement may
be satisfied. Id. Participants, those suing for the wrongful death of
a participant, their attorneys or representatives must promptly
notify MO HealthNet of any recovery, and “shall immediately
~ 14 ~
Section 208.215.8 establishes MO HealthNet’s lien upon
payments made towards a settlement or judgment. The lien applies
to any moneys which come into the possession of plaintiff’s counsel
and attaches to any verdict or judgment which may be recovered on
a claim. Id.
MO HealthNet may file an action to recover the funds due under
section 208.215.1 against “the person, corporation, institution,
public agency, or private agency liable to the participant, minor or
estate.” § 208.215.2, RSMo. The Department of Social Services,
the MO HealthNet participant or a defendant may file a petition for
adjudication of the respective rights of the parties and enforcement
of the lien. § 208.215.9, RSMo. The Court may determine the
portion of recovery to be paid to the Department of Social Services
following an evidentiary hearing on: 1) the amount of the charge
sought to be enforced against the recovery, expressed as both a
percentage of the gross recovery and as a percentage of the net
recovery after subtraction of attorney’s fees and costs, and whether
the department should bear a proportionate share of the fees and
costs; 2) the amount of the attorney’s fees and costs incurred by
the plan participant; 3) the total medical expenses incurred for the
relevant care, the portions paid respectively by the participant,
insurance, MO HealthNet and the portion unpaid; 4) whether the
recovery is less than substantially full compensation for the injuries
and medical expenses incurred; 5) the age of the participant and the
participant’s dependents, the nature of the participant’s injuries,
their impact on the participant’s employability, education and need
for future treatment, and the costs of any such future treatment
relative to the participant’s ability to meet those needs; and 6) the
realistic ability of the participant to repay the lien. § 208.215.9(1)
– (6), RSMo. The burden of proof lies with the party seeking the
reduction of the amount of the lien. § 208.215.10, RSMo.
The court may reduce and apportion the lien proportionate to the
recovery of the claimant. The factors to be considered in such
reduction include the nature and extent of the injury, the economic
and non-economic loss, settlement offers, comparative negligence,
and medical expenses and costs. § 208.215.11, RSMo. MO
HealthNet shall pay its pro rata share of the attorney’s fees based
on the amount of the lien compared to the total settlement amount.
Id. The MO HealthNet lien does not affect attorneys’ liens asserted
under section 484.140, RSMo but does take priority over all
other liens. Id. MO HealthNet may also settle its claim for
reimbursement and enforcement of the lien by considering the
factors set forth above in section 208.215.9. § 208.215.12, RSMo.
Medicare and Medicaid Liens >p15
Medicare and Medicaid Liens
(Continued from page 14)
Issues During Settlement Negotiations/Post-Judgment
ISSUES FOR DEFENSE COUNSEL AND
RECOMMENDATIONS
A sizeable Medicare or Medicaid lien can make a settlement costprohibitive. Negotiating a lien is typically a time-consuming and
arduous process. For that reason, it is in the interest of plaintiff’s
counsel to begin to negotiate a reduction of the lien as early in the
litigation as possible. Not all plaintiffs’ attorneys realize the
importance of early contact with Medicare and MO HealthNet, so
defense counsel should be prepared to prompt the interaction.
Whether the case is resolved by settlement or judgment, a
defendant must take steps to ensure Medicare and MO HealthNet
liens are fully satisfied.
Issues During Litigation/Investigation
The newly-enacted Medicare reporting requirements require
insurance carriers to notify Medicare of its potential right to
reimbursement as soon as the carriers have cause to believe
reimbursement may be due. Defense counsel should ensure their
insurance clients are aware of and are complying with this law.
Defense counsel should also ensure that early investigation is
conducted on the existence of any potential Medicare liens. If a
Medicare payment has been made, the insurance client must be
notified immediately of the need to inform Medicare of its potential
lien to avoid imposition of fines for a delay in reporting. Although
MO HealthNet provisions do not carry the same penalties, failure
to satisfy these liens could result in a satisfaction of judgment or
settlement payment being rendered void.
Unlike Medicare liens, the MO HealthNet lien can be adjudicated
by the Court or negotiated by MO HealthNet; the final amount of
the lien may therefore be determined during litigation, before
settlement negotiations are conducted. Efforts to reduce Medicare
or MO HealthNet lien amounts are often centered on disputing the
relationship between particular health care services and the primary
payer’s responsibility to reimburse Medicare or MO HealthNet. To
that end, plaintiffs’ attorneys have used the testimony of defense
experts to justify reduction of the lien. The process has been known
to take years in some cases.
Given the potential penalties to the client for failure to satisfy a lien,
defense counsel must ensure that any Medicare or MO HealthNet
lien is discovered as early as possible so the lien receives
appropriate attention during the course of litigation. If the claimant
is over age 65, under 65 but disabled or in end-stage renal disease,
the existence of a Medicare lien should be presumed until proven
otherwise. If the claimant is of limited means, the existence of a MO
HealthNet lien must be investigated beyond simply submitting an
interrogatory on the issue. Medical bills may reference a Medicare
or MO HealthNet payment and should be inspected for such
evidence. Also, the appropriate regional Medicare or Medicaid
office will confirm both the existence and amount of a Medicare or
MO HealthNet lien.
Once existence of the lien is determined, the most complex issue to
address is the final computation of the lien amount. The primary
responsibility for this lies with plaintiff’s counsel, however defense
counsel should cooperate and assist to the extent possible when
necessary to ensure proper resolution of the lien. While the lien
amount can be initially estimated from medical bills, defense
counsel should contact the appropriate regional Medicare or
Medicaid office to determine the exact amount of the lien. This
should be done as soon as counsel has reason to believe the
respective entity has made a payment for medical services on behalf
of the plaintiff. The appropriate CMS Regional Office or the
Medicare Secondary Payer Recovery Center can be reached at:
847-839-7700, 866-MSPRC-20, or through their website,
www.cms.hhs.gov/MSPRecovClaimPro. The MO HealthNet Jefferson
City office can be reached at 800-392-1261, 573-751-3425, or
www.dss.mo.gov/mhd. Plaintiff’s counsel should be involved in, or
at least apprised of, contact that defense counsel has with MO
HealthNet, as he/she has an obligation to notify MO HealthNet of
his/her involvement. If continuing care is expected, updated
information on the lien amount must be obtained periodically
throughout a case.
Regardless of whether efforts to reduce a lien are successful,
defense counsel must ensure that the full amount of the lien is or
will be satisfied, either through reimbursement or compromise,
before allowing a settlement or judgment payment to be made.
Federal law specifically dictates that a primary payer may be
required to pay for a lien twice if it is not satisfied with settlement
or judgment proceeds. While Missouri law is not as explicit, it does
prohibit satisfaction of a judgment or settlement without notice to
MO HealthNet. Thus, MO HealthNet could challenge the
satisfaction of a judgment or settlement. If such an action were
pursued and plaintiff did not save sufficient funds to satisfy the lien,
a defendant could ultimately have to pay a MO HealthNet lien
amount twice. Indemnification of the defendant and the defendant’s
insurer by the plaintiff for payment of the lien should be a
mandatory term of any settlement so the defendant has a right of
action against a plaintiff who fails to satisfy a lien. Defense counsel
should not assume a lien will be satisfied, however; measures must
be taken during the payment process to ensure Medicare or MO
HealthNet will be reimbursed.
Settlement/Judgment Payees and Ethical Issue
www.MODLLaw.com
Plaintiffs often demand payment of a settlement within days of an
agreement being reached. If a lien exists and has not yet been
negotiated, defendants can be left in a quandary about whether to
include the lien-holder as a payee on a settlement check to ensure
the lien is satisfied. Plaintiffs’ counsel typically do not want
Medicare or MO HealthNet named as a payee on a draft for the full
amount of the settlement because they will lose leverage in
negotiating the lien and experience significant delays in receiving
settlement proceeds. To address this, defendants have issued
separate checks; one to the plaintiff and plaintiff’s counsel, and a
second to plaintiff, plaintiff ’s counsel and the lien-holder in an
Medicare and Medicaid Liens >p16
~ 15 ~
Missouri Organization of Defense Lawyers (MODL)
P.O. Box 1072
Jefferson City, Missouri 65102
First Class Mail
U.S. Postage
PAID
Jefferson City, MO
PERMIT NO. 118
Medicare and Medicaid Liens
(Continued from page 15)
amount sufficient to satisfy the lien. In that circumstance, a debate
often arises regarding the amount to be held aside to ensure
satisfaction of the lien. To resolve this debate and speed up the
distribution of settlement proceeds, some plaintiffs’ counsel have
been willing to agree to indemnify the defendant for any existing
liens. The Supreme Court has recently made clear that this practice
is not permitted by the Rules of Professional Conduct.
On November 13, 2008, the Advisory Committee of the Supreme
Court of Missouri issued Formal Opinion 125, “Agreeing to
Indemnify Opposing Party as a Term of Settlement.” The Committee
held that a guarantee to cover a client’s debt constitutes the
provision of financial assistance to a client. Rule of Professional
Conduct 4-1.8(e) prohibits a lawyer from providing financial
assistance to a client in connection with a pending or contemplated
litigation. Thus, the Rule precludes an attorney from agreeing to
repay a client’s debt to a third party if the client fails to make the
repayment out of settlement or judgment proceeds. Because the
plaintiff’s counsel would violate Rule 4-1.8(e) by agreeing to
indemnify the defendant for a lien, the defense attorney would
commit a violation of Rule 4-8.4(a) if she requested or demanded
the plaintiff’s attorney enter such an agreement.
This Advisory Opinion further held that Rule 4-1.15(f) requires an
attorney holding funds in which both his client and a third party
have an interest to either disburse the funds to the third party, or
hold the funds in trust to allow the dispute between the client and
the third party to be resolved. If the dispute is not resolved in a
reasonable time, the attorney must interplead the funds. The
opinion goes on to state that if a valid lien exists and a plaintiff
insists his attorney not satisfy it, the attorney must hold the funds
in trust until the dispute can be resolved. This is consistent with the
provisions of section 208.215.4, RSMo.
Because this opinion prohibits incentivizing satisfaction of the lien
by making plaintiffs’ counsel subject to a suit by defendants who are
made to pay a lien amount twice, defense counsel must re-examine
their practice for ensuring liens are satisfied. The Supreme Court
Advisory Committee suggests and section 208.215.4 states the
appropriate course is for plaintiff’s counsel to hold the funds in
trust pending negotiation of the lien. In any settlement requiring
court approval, the Order approving a settlement should reference
plaintiff’s counsel’s responsibility to place a specific amount of the
settlement proceeds in a trust account pursuant to Opinion 125.
The release or settlement agreement should also include language
referencing Opinion 125’s mandate that the plaintiff’s attorney
hold funds sufficient to satisfy the lien in a trust account. Because
this obligation already exists, such language in a lien-satisfaction
clause would not violate Rule 4-1.15(f). See Advisory Opinion
125. Furthermore, inclusion of such language may help protect
plaintiff’s counsel from the ire of a plaintiff demanding payment of
the full amount of the settlement before a lien is satisfied.
With inclusion of this language in the release and/or order, in most
cases it would not be necessary to include Medicare or MO
HealthNet as a payee on a settlement draft. Inclusion of the lienholder as a payee precludes plaintiff’s counsel from depositing the
check into his or her trust account without endorsement of the
check by a Medicare or MO HealthNet representative. As a
practical matter, obtaining such an endorsement without the lienholder confiscating the entire settlement amount is impossible.
Provided the release and/or order contains language regarding the
amount of the settlement proceeds to be held in trust by plaintiff’s
counsel, a second check which includes the lien-holder as a payee
is also not necessary to ensure a defendant is sufficiently protected
from an action for recovery on the lien. Of course, the best
protection from such an action is to determine the final lien amount
before settlement is reached so that satisfaction of the lien can be
made directly by the defendant or its insurance carrier. In any event,
the best practice would involve an agreement by plaintiff or
plaintiff’s counsel to provide defense counsel with notice of
satisfaction of the lien, whenever that may be achieved.