The recent decision in Mayo v. NYU Langone Med. Ctr., 2018 NY Slip Op. (U) 30456 (N.Y. Sup. Ct. March, 13, 2018), voiding a settlement on grounds of mutual mistake, holds important lessons for those seeking to resolve a claim concerning a Medicare beneficiary, as reliance on a conditional payment notice may provide grounds to void a settlement.

Specifically, counsel now must be certain to take advantage of the “Final Conditional Payment Process” offered by the Centers for Medicare & Medicaid Services (CMS). That process allows parties to (1) advise CMS that a matter is within 120 days of settlement to obtain a final determination before finalizing the settlement or (2) request within 3 days of settlement an expedited final determination through the Medicare Secondary Payer Recovery Portal (MSPRP).

Background

The facts of the case are rather simple. In reaching an agreement, the parties relied on a conditional payment notice (CPN) from CMS, which stated that the total medical expense paid as of the January 15, 2015, date of the letter was $2,824.50. That conditional notice, like all such notices issued by CMS, included a caveat that CMS was continuing to review the medical expenses subject to recovery. In the disputed agreement, it was represented that the $2,824.50 was in fact the amount subject to Medicare’s recovery rights, even though before the settlement was finalized in July 2015 an additional $1,811.95 CPN was issued by Medicare. In January 2016, the parties then entered into a final agreement for $725,000, the balance of which after allowance of the Medicare costs of $2,824.50 was paid jointly to the decedent’s estate and counsel.

Subsequently, CMS issued a final demand of $145,764.08 for the medical care for which it had paid. The agreement, however, detailed that $2,824.50 was the final amount of all liens against the recovery. Neither plaintiff nor defense counsel ever sought a final determination from CMS.

The court voided the settlement, finding that the parties had erroneously relied on the conditional CMS letter as the final amount owed to CMS. In its decision, the court was clear that even though the plaintiff had exhausted all appeals with CMS in an effort to reduce Medicare’s recovery, this was irrelevant in light of the fact that both counsel should not have relied on the CPN as the basis for final determination of CMS’s recovery rights. In this regard, the court also rejected arguments from defense counsel that it believed that the CPN was the correct final amount, and that in any event it was plaintiff’s responsibility to verify the true final amount due Medicare.

Practice Point

The lessons of Mayo are simple. Counsel must make certain that settlement agreements are explicitly worded to account for any change in the final CMS recovery amount, and are best served taking advantage of the expedited CMS procedures for obtaining a final determination to avoid any dispute.