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Ruling could help providers recover money from Medicare Advantage sequestration cuts

By: Lisa Shencker

A recent decision by a federal judge may help bolster providers’ lawsuits against Medicare Advantage plans over those plans’ decisions to slash reimbursement rates in response to federal budget cuts.

In the case at issue, 11 Florida providers are suing Humana, saying the insurer wrongly cut payments to them in response to the 2013 federal budget cuts known as sequestration. During sequestration, the CMS reduced payments to Medicare Advantage organizations by 2%, and many of those organizations then passed those cuts on to providers in the form of lower payments.

The providers argue that their contracts with the plans prohibit such cuts. A Humana spokesman declined to comment on the case Thursday, but Humana has argued in court documents that, in order to prevail, the providers would have to show that Humana promised a certain reimbursement rate.

Though the case is ongoing, U.S. District Court Judge Ursula Ungaro in Miami decided on Aug. 18 that the matter will move back to state court—a decision that could help the providers in this case and in other cases brought over the same issue.

Had the case remained in federal court, Humana could have raised a number of defenses related to federal regulations, including that, as a federal officer, it should be immune from such suits, said Ken Hartmann, a lawyer for the providers in the case and a partner at KozyakTropin and Throckmorton in Miami.

Humana argued in court documents that when it reduced payments to providers, it was doing so as a federal officer, acting on behalf of federal agencies.

“If a federal officer enters into private contracts as part of its federally mandated duties under a comprehensive and detailed federal regulatory regime, plaintiffs would deny the federal officer access to the federal courts,” Humana said in court documents.

Ungaro, however, rejected that argument in her decision. She wrote that Humana’s payments to providers were governed by its contracts with those providers, not federal laws or programs.

“By giving a ruling up front [that Humana] is not a federal officer, it really takes the wind out of the health plan’s sails,” said Douglas Wolfe, also an attorney for the providers in the case and a partner at Kozyak.

Wolfe said the decision marks the first time a court has made a ruling about whether a Medicare Advantage plan can be considered a federal officer in relation to a sequestration case.

Brian Foley, a partner at Schenck, Price, Smith and King, who was not involved in the case, agreed that the decision to send the Humana case back to state court could help providers in other similar cases.

Not only did Ungaro rule that Humana was not acting as a federal officer, she also affirmed that the CMS did not tell plans how to handle the sequestration cuts, Foley said. In her decision, the judgequoted a 2013 CMS letter to Medicare Advantage organizations that said “whether and how sequestration might affect [a Medicare Advantage Organization’s] payments to its contracted providers are governed by the terms of the contract between the [organization] and the provider.”

“For the first time, we have a federal court saying it’s absolutely governed by the terms of the contract and there’s nothing in sequestration law that requires this be passed on to providers,” said Foley, who is currently handling a similar matter in arbitration.

Andrew Wachler, managing partner of Wachler and Associates, said that although not all courts will be bound by the decision to send the Humana case back to state court, “It still is an opinion that the analysis that can be relied upon by providers and also could help lead to settlements.” Wachler also has been involved in other similar matters in arbitration.

A number of disputes over sequestration cuts are in arbitration. In fact, the majority of such disputes are likely in arbitration because of the contract terms in question, Hartmann said.

At least a handful of similar cases involving various providers and insurers are also working their way through the courts. Most cases have not yet been decided, though a Pennsylvania state court decided in May against Highmark in a similar case.

In that case, Allegheny Common Pleas Court Judge R. Stanton Wettick wrote, “Highmark has been unable to point to any provision within the Provider Agreements that would support its 2% reduction from the amount Highmark is obligated to pay under the Provider Agreements.”

Hartmann and Wolfe noted that more cases concerning the same issue might emerge as providers become aware of the recent verdicts.

“To some extent, the smaller providers and institutions aren’t even necessarily aware they are suffering as a result of these sequester reductions because the manner in which the managed-care company explains the sequester isn’t necessarily transparent,” Hartmann said.

Wolfe said billions of dollars are potentially at stake. In the Humana case, the providers say they’re owed more than $8 million.

“This ruling we’ve gotten really paves the way to help providers bring these cases and pursue that money,” Wolfe said.

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Hollywood Settles Beating Claim for $240,000

Paul Gozaloff, 45, a computer technician, was putting up campaign posters for presidential candidate Rudy Giuliani in Hollywood in 2008 when he went to a traffic stop while trying to find another campaign sign worker. He said he was beaten by several Hollywood police officers without justification and arrested on trumped-up charges of drug possession and obstructing a traffic stop. A judge dismissed the charges, ruling the arrest and search illegal. He claimed head, facial and body bruises and a residual psychiatric injury.

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Health Care Insolvency Is on the Rise: The Treatment of WARN Act Obligations and Preserving Provider Agreements in Bankruptcy

By David A. Samole

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Ocwen, Assurant Deal Objectors Say 9th Circ. Is On Their Side

By Jody Godoy
Law360

Objectors to a $140 million deal between homeowners, Ocwen Financial Corp., and Assurant Inc. over allegedly inflated force-placed insurance premiums asked a Florida federal court Thursday to consider a Ninth Circuit ruling pointing to “subtle signs” that class counsel, in that case, skewed a settlement in their own interest. The deal proposed in April would settle allegations by a proposed class that the insurer paid the mortgage servicing company to inflate force-placed insurance premiums.

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Borrowers Seek Final OK For $54M Deal In Nationstar Row

By Kurt Orzeck
Law360

Borrowers accusing Nationstar Mortgage LLC of colluding with force-placed insurance providers to make lucrative profits asked a Florida federal judge on Monday to finalize a $54 million settlement of their class action, calling it an “extraordinary” result for the plaintiffs.

Plaintiffs’ motion for final approval of the deal said it would resolve claims by roughly 380,000 borrowers who allegedly had mortgage loans with Nationstar and were overcharged for hazard, flood or wind coverage issued by Assurant Inc. or its subsidiaries between Jan. 1, 2008, and Jan. 30 of this year.

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Miami Ultimate CEO Awards

As founding partner of Kozyak Tropin & Throckmorton and co-chair of the firm’s bankruptcy practice, John W. Kozyak has earned a host of professional accolades.

He has been recognized in every edition of Best Lawyers In America since it was first published in 1983. For the past six years, he has been identified as one of its “Bet-the company” litigators in Florida. Chambers USA has ranked him as one of the top bankruptcy lawyers in Florida in its America’s Leading Lawyers For Business, and in 2011, he was selected as one of the Top 10 lawyers in Florida by Super Lawyers, and named to Florida Trend’s Legal Elite Hall of Fame.

Along with a shelf of other humanitarian and legal service awards, the firm received the Supreme Court Chief Justice’s Law Firm Commendation for providing free legal services, and Kozyak received both the Florida Bar President’s Pro Bono Service Award and the Florida Bar’s G. Kirk Haas Humanitarian Award.

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11th Circ. Told To Nix BofA $228M Force-Placed Insurance Deal

By Emily Field
Law360

Two members of a settled class action accusing Bank of America NA of accusing the bank of overcharging homeowners for forceplaced insurance told the Eleventh Circuit on Tuesday that the $228 million deal shouldn’t have been approved because the settlement amount is illusory.

Appellants Michael and Jill Trapasso told the Eleventh Circuit that a Florida federal judge shouldn’t have signed off on the settlement last year and the class counsel’s $16 million fees because there’s no common fund and no minimum payout. The Trapassos say that the $228 million valuation is “fiction,” only a small percentage of class members had filed claims before the deal was approved and there’s no evidence how many of those are valid claims.

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Allegedly abusive mortgage insurance deals lead to class action settlement

By Kenneth R. Harney

Anyone who has taken out a home mortgage knows that one of the borrower’s key responsibilities is to pay hazard insurance premiums on the property and not let the policy lapse.

But are you aware that if you fail to keep the insurance current, or if the premiums aren’t paid from your escrow account, the lender or its mortgage servicer can obtain its own coverage, which may cost you more than the policy you originally chose?

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Young leaders don’t want the top job

By Cindy Krischer Goodman

Inside the cubicles at many workplaces, a strange trend is taking place. Young people don’t want to upgrade their cubicle for the corner office. Workplace experts call it “the aspiration gap.”

At a time when 10,000 boomers a day are retiring, businesses need young workers to lead their companies into the future. But only 11 percent of millennials said they aspire to senior level positions at their company, found a recent study by talent management firm Saba and WorkplaceTrends.com.

Dan Schawbel, founder of WorkplaceTrends.com, says the reason for the aspiration gap among young workers could be simple: “They just don’t see the path up.”

Emerging from the recession, many companies have focused on recovery and growth rather than training their young workers for leadership positions or communicating career paths. Only 15 percent feel the training they receive is preparing them for the next position, according to the study, which polled 1,000 human resources professionals and 1,000 workers across age brackets.

“I have to admit, it takes effort,” says Detra Shaw-Wilder, 45, managing partner at her Miami law firm, Kozyak Tropin & Throckmorton, founded in 1983. Since taking over the top job at her firm, once held by senior partners, Shaw-Wilder has become mindful of developing young associates into partners. “We want to look to the future and groom leaders. If we don’t focus on it, and we get busy with the practice of law, I could see where young people could get frustrated.”

Another factor also is at play, explains Ladan Nikravan, senior editor at Human Capital Media Group and author of the Ask a Gen Y blog. “Millennials want fulfillment from work. They don’t feel they have to go straight up. Being CEO might not be their definition of success.”

As a manager of millennials, Mike Prokopeak, vice president and editor of Chief Learning Officer Magazine, says his experience reflects that thinking: “They believe there are other career paths out there that do not consume their lives the way the c-suite would.” Younger workers are looking for more responsibility and higher pay, he says. “But they are OK with having a range of experiences and contributing to results in their own way.”

Experts believe companies are unprepared to deal with this generational shift in attitude toward leadership. Because Gen X is a small generation compared to the others, there simply aren’t enough of them to fill the leadership roles that baby boomers will vacate. Gen Y (millennials) will have to step into those roles faster than in the prior decades — and companies will have to move faster to prepare them.

“Most companies are waiting around,” Schawbel says. “But we see the problem now and think they should start to do something about it before it’s too late.”

Some companies already see signs of a growing talent gap at the executive level. In the survey, 60 percent of HR executives polled said they were struggling to find candidates to fill senior leadership roles. And, in a survey by Human Capital Media Advisory Group, about 76 percent of human resources practitioners said their organizations search outside to fill gaps in the leadership pipeline.

One option might be to rethink leadership development to give young workers more ongoing mentoring, coaching and feedback. EdAssist, a Bright Horizons brand, surveyed millennials and found that most value professional development over regular pay raises. If asked to choose between similar jobs, six in 10 would pick the job with potential for professional development over one with regular pay raises.

Human Capital’s Nikravan says telling a young worker they have potential to be CEO or a company leader in the future doesn’t work for her generation. “Instead of someone saying we have our eye on you, millennials want leadership training at every stage in their career. They want specific, relevant training on how to succeed in the job they are in and get to the next step.

At her law firm, Shaw-Wilder says she has become mindful about giving leadership opportunities to her younger lawyers early in their careers. For example, she has asked Tal Lifshitz, a young associate, to oversee the firm’s summer program this year, and has given him authority over which law students to interview and include. “I can’t really give big litigation to a young attorney and let them run with it, but I do look for ways to make sure young attorneys feel important and a valuable part of team.”

To be sure, some companies are actively providing opportunities to employees at all levels to learn new skills. Large companies such as ADP, Hilton Worldwide and State Farm received awards in Miami this week at the Chief Learning Officer Symposium for their workforce development strategies. But developing young workers can be particularly tricky at companies where age is seen as an advantage, such as wealth management and financial services firms.

At GSK Wealth Advisors in Miami, founder Jeff Koch, 69, just executed a well thought out succession plan that has been in the works for several years. Koch has handed the leadership of the 12-person firm to Maria Blet, who as CEO will be charged with serving clients, managing the firm, and grooming the next generation of firm management. “That’s difficult because in our business, gray hair is good and the pipeline is not as strong as it needs to be,” Koch says. As the demand for advice and financial planning continues to increase, Blet’s responsibilities will include developing younger wealth managers and luring younger clients. Most businesses built around an entrepreneur have a very difficult time transitioning to the next chapter — and the one after. However, Koch says Blet has a strength that will help her: “She communicates like crazy.”

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