• Edwards v. Blue Cross Blue Shield of Texas No. 5-07-01281-CV Tex. App. December 19, 2008
  • December 13, 2009 | Authors: Arthur N. Lerner; Bruce O. Tavel
  • Law Firm: Crowell & Moring LLP - Washington Office
  • The Court of Appeals of Texas recently ruled that a provider’s state law contract and tort claims against Blue Cross Blue Shield of Texas (“BCBST”) were “inextricably intertwined” with claims for Medicare benefits and were therefore preempted by the Medicare Act.

    Dralves Gene Edwards, a physician, sued BCBST, seeking consequential damages resulting from BCBST’s alleged violations of state laws. Edwards alleged that BCBST, as a Medicare Part B carrier, violated these laws by placing him on pre-payment review, negligently administering the pre-payment review and then fraudulently denying nearly all his Medicare Part B billings over two years.

    Although Edwards had successfully recovered money for the denied reimbursement claims through the Medicare administrative review process, he sued BCBST for consequential damages resulting from breach of contract and torts.

    Relying on decisions by courts addressing similar state law claims and holding that “those claims were inextricably intertwined with claims for Medicare reimbursement, and thus arose under the Medicare Act,” the Court held that Edward’s state law contract and tort claims were preempted by the Medicare Act. Under these decisions, the courts held that making a claim for collateral damages rather than challenging the denial of benefits did not prevent the claims from being inextricably intertwined with claims for Medicare benefits. Moreover, the completion of an administrative review of the Medicare reimbursement claims did not prevent the state law claims from being inextricably intertwined with the Medicare Act.

    The Court explained that Edward’s claims were inextricably intertwined with his claims for Medicare reimbursement because a court would need to review each Medicare reimbursement claim and BCBST’s denial of those claims in order to determine whether those denials were tortious or a breach of contractual duty. Further, under Medicare, judicial review is only permitted after a party receives an adverse determination upon exhausting administrative review of the denied claims. Accordingly, the Court held that because Edward’s reviews did not result in an adverse decision, he was not entitled to further review by a court.