Air-ambulance underpayment suit against Kaiser Permanente remains grounded

(Reuters) - Air-ambulance operator Jet Rescue can’t sue Kaiser Permanente for “drastically underpaying” its bills for transporting two patients from Mexico to San Diego, a federal appeals court held.

Since the passengers were enrolled in Medicare Advantage Plans, no court can hear the case until Jet Rescue exhausts the administrative review process set out in the Medicare Act and its regulations, the 9th U.S. Circuit Court of Appeals affirmed Friday.

In a case of first impression for the circuit, the three-judge panel held that the administrative-exhaustion requirement for “original” Medicare claims also applies to private Medicare Advantage Plans, known as Medicare Part C.

The 11th U.S. Circuit Court of Appeals had reached the same conclusion in 2017, but Jet Rescue took an entirely new vector: it argued that the text of the Medicare Act only requires administrative review before suing “an officer or employee of the United States,” leaving out private entities like Kaiser Permanente.

The 9th Circuit acknowledged that the statutory language was “an awkward fit,” but said Congress must have intended for it to include private Medicare Advantage organizations. Otherwise, “the detailed administrative review scheme Congress created” for Medicare Part C “would be wholly optional,” Circuit Judge Paul Watford wrote.

“We do not believe Congress went to the trouble of creating a multi-level administrative review scheme merely to have it invoked (or not) at the pleasure of enrollees or their assignees,” Watford wrote, joined by Circuit Judges A. Wallace Tashima and Milan Smith Jr.

Kaiser Permanente spokesperson Marc Brown said Friday the decision is important because “administrative exhaustion helps to reduce the burden on courts and allows CMS to bring its expertise to Medicare issues which, as the Court has noted, is an area of enormous complexity.” The company was represented by attorneys at Sheppard Mullin Richter & Hampton.

Boca Raton-based Jet Rescue was represented by attorneys at K&L Gates. They did not immediately respond to requests for comment.

According to the complaint filed in federal court in San Diego in 2019, Jet Rescue billed Kaiser about $500,000 in total, for transporting patient “X” in 2014 and patient “Y” in 2016.

Along with their Medicare Advantage Plans, which included original Medicare coverage, both patients had paid extra for an optional coverage package that included international air-ambulance transport.

However, Kaiser told Jet Rescue the original Medicare portion of the plans covered emergency medical transport. Therefore, it paid what it calculated as the Medicare mileage rate – about 8 percent of the total.

The 9th Circuit said the payment dispute is “inextricably intertwined” with coverage under the Medicare Act, which is another reason it must go through the administrative process.

The case is Global Rescue Jets LLC dba Jet Rescue v. Kaiser Foundation Health Plan dba Kaiser Permanente, 9th U.S. Circuit Court of Appeals, No. 20- 56410.

For Global Rescue Jets: George Barbatsuly and Caitlin Blanche of K&L Gates

For Kaiser Foundation Health Plan: Moe Keshavarzi and Matthew Halgren of Sheppard Mullin Richter & Hampton

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