Deals & Cases

Health care clients obtain Sixth Circuit victory in Medicare secondary payer litigation

In a consolidated appeal the Sixth Circuit affirmed seven district court dismissals of suits brought by professional guardian Douglas Stalley against, among others, Jones Day clients Methodist Healthcare, Sumner Regional Health Systems, Inc., Wellmont Health System, and Mountain States Health Alliance under the Medicare Secondary Payer ("MSP") statute's private cause of action. This is the second appellate ruling on the more than 50 virtually identical suits brought by Stalley and consumer activist Erin Brockovich against hospitals and health systems in Arkansas, California, Florida, Pennsylvania, and Tennessee. The Sixth Circuit’s ruling comes on the heels of a similar decision by the Eighth Circuit in December 2007.

The suits alleged that the hospitals violated the MSP statute by failing to reimburse to Medicare conditional payments received on behalf of unidentified Medicare beneficiaries for treatment necessitated by alleged and unidentified incidents of medical malpractice at the hospitals' facilities. Stalley, who is not a Medicare beneficiary, purported to bring suit on behalf of the United States and sought recovery of the double damages authorized by the MSP statute. Every district court that has ruled on the defendants' motions to dismiss has held that the MSP private cause of action is not a qui tamstatute, and consequently Stalley and Brockovich do not have standing to bring suit.

In addition to affirming that the MSP private cause of action is not a qui tamstatute, the Sixth Circuit ordered Stalley’s counsel to show cause why the Sixth Circuit should not impose sanctions for advancing their "utterly frivolous" claims. Appeals remain pending before the Third, Ninth, and Eleventh Circuits. Ted Bilich argued before the Sixth Circuit on behalf of the seven appellees. Greg Luce, Ted Bilich, Jeff LeVee, Jim Poth, Erin Burke, Paul Reichert, and Nolan Young worked on the appellate and district court briefs for the clients. The case is Stalley v. Methodist Healthcare, No. 07-5077.