Search Icon
Medicare Advantage Marketing Rules and HHS’s 90-Day Extension Banner Image

Medicare Advantage Marketing Rules and HHS’s 90-Day Extension

Month: May 2023

Medicare Advantage Marketing Rules and HHS’s 90-Day Extension

Posted on by Christie Bowness

CMS Finalizes New Rules for Medicare Advantage Marketing and Prior Authorizations

Centers for Medicare & Medicaid Services (“CMS”) recently finalized new rules (88 FR 22120) seeking to streamline Medicare Advantage (“MA”) and Medicare Part D prior authorizations and further penalize misleading marketing practices.  The final rule takes effect on June 5, 2023.

Regarding prior authorizations, coordinated care plan prior authorization policies may only be used to confirm the presence of diagnoses or other medical criteria and/or ensure that an item or service is medically necessary. Coordinated care plans must also provide a minimum 90-day transition period when a beneficiary undergoing treatment switches to a new MA plan, during which the new plan cannot require prior authorization for the active course of treatment. All MA plans are required under the new rule to establish utilization management committees to review policies annually and ensure consistency with traditional Medicare national and local coverage decisions and guidelines. However, prior authorization approvals are still required to meet CMS’s medically reasonable and necessary standard.

To address misleading marketing practices, CMS has instituted a prohibition on advertisements that do not mention a specific plan name or that use words and imagery that may confuse beneficiaries. CMS has further instituted a prohibition on advertisements from using Medicare logos in ways that are misleading, confusing, or misrepresent the plan.

A fact sheet for the new rule can be found here.

HHS’s 90-Day Grace Period and Other Cybersecurity Efforts Impacting Healthcare

Following the expiration of the COVID-19 federal public health emergency on May 11, 2023, the Department of Health and Human Services' ("HHS") Office for Civil Rights ("OCR") will no longer refrain from imposing potential penalties for violations for certain provisions of the Health Insurance Portability and Accountability Act of 1996 ("HIPAA")  privacy rule for uses and disclosures of protected health information ("PHI") by business associates. However, the OCR announced that there will be a 90-calendar day transition period for covered healthcare providers to come into compliance with HIPAA with respect to their provision of telehealth using non-public-facing remote communication technologies. Such transition period went into effect on May 12, 2023, and will expire at 11:59 p.m. on August 9, 2023.

Following the announcement of the end of the public health emergency, HHS, through the Administration for Strategic Preparedness and Response and the Health Sector Coordinating Counsel Joint Cybersecurity Working Group, released a cybersecurity framework implementation guide to help both the public and private healthcare sectors prevent cybersecurity incidents. The Cybersecurity Framework Implementation Guide provides specific steps that healthcare organizations can take immediately to manage cyber risks to their information technology systems.

Around the same time, the Biden Administration issued its National Cybersecurity Strategy. Specifically, the Strategy aims at rebalancing responsibility to defend cyberspace by shifting the burden for cybersecurity onto organizations that are most capable. The Strategy has significant implications for critical infrastructure entities, including the healthcare sector.  The Strategy will be overseen by the Office of the National Cyber Director, which has already begun the implementation process.

Federal Appeals Court Denies Easement Rights-Based Challenge to Eminent Domain Title

Posted on by Christie Bowness

On May 10, 2023, the Ninth Circuit Court of Appeals (“the Court”) issued a wide-ranging opinion –  currently pending publication – in the matter of United States of Am. v. 6.03 Acres of Land in the Cty. of Santa Barbara, No. 21-56358, 2023 LEXIS 11452 (9th Cir. May 10, 2023), addressing the revised application of the Quiet Title Act in light of the United States Supreme Court’s March 28, 2023 decision in Wilkins v. United States, 143 S. Ct. 870 (2023), as well as touching upon interesting easement and eminent domain principles.

Background

The facts of this matter commence in 1952, at which time the United States filed an eminent domain action to take possession of land located in Montecito, California that was needed to construct the Ortega Reservoir.  A portion of the land being taken was owned by Phillip and Ethyl Cunniff (“the Cunniffs”), who were the owners of numerous acres of additional land in this area.  In 1955, a final judgment was entered approving the United States’ acquisition of this portion of the Cunniffs’ land, with the judgment specifying therein that the land had been taken “subject . . . to existing rights of way in favor of the public or third parties for highways [and] roads.”

In 1958, the Cunniffs sold forty-five acres of their remaining land (“the Property”) to Loma Griffith, who then transferred ownership of the Property to Kimball-Griffith, L.P. (“Plaintiff”).  The Property was located directly north of the now constructed Ortega Reservoir, with an access road running along the southern edge of the Property just within the boundaries of the reservoir land.  In 1989, the federal Bureau of Reclamation granted Santa Barbara County an easement over the access road, with the County installing locked gates across the road blocking public entry.

No further events transpired for more than thirty years, until, in November 2020, Plaintiff filed suit against the United States, various federal commissioners and state county heads, and the Bureau of Reclamation, seeking to reopen the 1955 final judgment based upon the assertion that it possessed a right to use the access road.  Amongst the various claims raised, Plaintiff sought ejectment and injunctive relief against the Bureau of Reclamation demanding removal of the gates blocking the access road, taking and conspiracy-to-commit-a-taking claims against Santa Barbara County and other local government pursuant to 42 U.S.C. § 1983, and a judicial taking claim against the district court itself.

Ultimately, Plaintiff’s case was dismissed in its entirety by the trial court on two bases.  First, the trial court found that the controlling statute of limitations had elapsed under the Quiet Title Act (“QTA”), found at 28 U.S.C. § 2409a(a), thereby barring Plaintiff’s claims for lack of jurisdiction.  Second, the trial court dismissed Plaintiff’s remaining claims as time-barred, due to Plaintiff’s decades-long failure to allege any property interest in the access road.

The Appeal

Plaintiff appealed the dismissal to the Court, first disputing the application of the QTA’s statute of limitations.  In assessing this claim, the Court first explained that the QTA operates to waive federal sovereign immunity with respect to claims challenging title or easements related to federal land, imposing a twelve-year statute of limitations for the commencement of any such claims.  28 U.S.C. § 2409a(g).

Plaintiff contended that the trial court erred in relying on this limitations period, claiming that its suit did not actually involve the QTA at all, as it was allegedly not seeking to bring a claim related to land but instead a claim related to the 1955 judgment.  Plaintiff argued that it had thus provided an alternative ground for jurisdiction independent of the QTA, reflected in the fact that the 1955 judgment contained language reserving the right for the court to “make further orders and decrees" related to the taken land.

The Court denied this claim, but in doing so differed from the trial court’s analysis.  First, the Court explained that, prior to March 2023, Plaintiff’s claims would have been dismissed on jurisdictional grounds – as the trial court had done – as the QTA’s statute of limitations had originally been interpreted as a jurisdictional requirement.  However, this interpretation was changed by the United States Supreme Court’s March 28, 2023 decision in Wilkins v. United States, 143 S. Ct. 870, 881 (2023), wherein the Supreme Court broke from prior precedent and held that the QTA’s limitations period would no longer be applied as a jurisdictional requirement, but instead a “claims-processing rule.”  In reaching this holding the Wilkins Court issued the broad-ranging holding that procedural requirements will now only be treated as jurisdictional where Congress clearly states such an intention.

Based on Wilkins, the Court thus held that Plaintiff’s claims could not be dismissed for lack of jurisdiction, but could still be dismissed on the alternate grounds of failure to adequately plead a property interest in the access road.  Specifically, the Court observed that all of Plaintiff’s numerous claims were contingent upon it establishing a “property interest in [the] easement over the” access road.  Plaintiff claimed it had done so, alleging the Cunniffs had possessed an easement over the access road as owners of property abutting the road, which had then passed to Plaintiff, and which the 1955 judgment had preserved based upon its language specifying that the Property was being taken “subject . . . to existing rights of way.”

Discussing the relevant case law, the Court observed that the owner of property abutting a public street is in-fact considered to hold a private property right “in the nature of an easement in the street,” and thus Plaintiff could have potentially prevailed, but for the dispositive issue that, at the time the Property was taken, the access road had not yet been made available for public use and thus could not be considered a “public street.”  The Court also held that Plaintiff had failed to demonstrate that the Cunniffs ever possessed an easement in the Property.  Indeed, prior to the eminent domain action, the Cunniffs had owned all of the land both underlying and abutting the access road.  Accordingly, as owners of all land related to the access road, it would have been an impossibility for them to hold an easement as “they could not have acquired a private easement” against themselves or against their own property.

Therefore, the Court affirmed the trial court’s dismissal of Plaintiff’s action.

Takeaways

The key takeaway from this opinion is of course the application of Wilkins v. United States, its removal of the jurisdictional element from statutes of limitation absent an express Congressional manifestation of an intent to the contrary, and its potentially broad impact.  However, also of interest is the Court’s discussion of the intersection between private property ownership and easement interests in abutting public land, and the fact that possession of such an interest can potentially provide grounds for challenging federal title.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, James Mazewski at jmazewski@riker.com, Kevin Hakansson at khakansson@riker.com or Kori Pruett at kpruett@riker.com.

Successful CMS Models, Physician-Owned Hospitals, and Price Caps

Posted on by Jessica Civetta

CMS Announces Proposed 2024 IPPS Rulemaking that Impacts Physician-Owned Hospitals

Centers for Medicare and Medicaid Services (“CMS”) recently announced proposed rulemaking regarding changes to the 2024 Inpatient Prospective Payment System (“IPPS”). The proposed rule, 88 FR 26658, would institute a wide variety of modifications for facilities under IPPS. Most of the attention of this proposed rule has been focused on physician-owned hospitals. The proposed rule would require such hospitals to satisfy all of the requirements of either the whole hospital exception or the rural provider exception to the Stark Law to qualify for Medicare payments for services referred by a physician owner or investor. The proposed rule further specifies that physician-owned hospitals may not increase the aggregate number of operating rooms, procedure rooms and beds above the level it was licensed for as of March 23, 2010, unless specifically granted an exception by CMS.

The comment period for the 2024 IPPS proposed rulemaking closes on June 9, 2023. A fact sheet may be accessed here.

CMS Announces Successful Payment Models

The Center for Medicaid and Medicare Innovation (“CMS Innovation Center”) released its biennial 2022 Report to Congress, which details progress on various savings programs. CMS Innovation Center was established to test innovative payment and service delivery models to reduce program costs while preserving or enhancing quality of care to individuals who receive benefits from Medicare, Medicaid, or Children’s Health Insurance Programs. Section 1115A(g) of the Social Security Act requires the Secretary of Health and Human Services to submit to Congress a report on the CMS Innovation Center’s activities under Section 1115A at least once every other year beginning in 2012. The 2022 Report is the 6th biennial report submitted by CMS to Congress.

During the period between October 1, 2020 and September 30, 2022, the CMS Innovation Center tested, announced or issued proposed rulemaking notices for 32 payment models. During that time period, CMS estimates that more than 41.5 million Medicare and Medicaid beneficiaries and individuals with private insurance in multi-payer model tests have received care from, or will soon receive care from, one of the more than 314,000 healthcare providers and/or plans participating in the CMS Innovation Center payment models. Since the CMS Innovation Center was established in 2010 and in the last decade, the CMS Innovation Center has launched over 50 model tests, with about 33 models operational during the two years covered by the 2022 Report.

According to the 2022 Report, six of the model tests have delivered statistically significant savings, net of any incentive or operational payments:

    1. Pioneer ACO Model;
    2. ACO Investment Model;
    3. Medicare Prior Authorization Model: Repetitive Scheduled Non-Emergent Ambulance Transport;
    4. Home Health Value-Based Purchasing Model;
    5. Maryland All-Payer Model; and
    6. Medicare Care Choices Model.

Further, two models showed significant improvements in care quality: the Home Health Value-Based Purchasing Model and the Medicare Care Choices Model.

The 2022 Report also showed that the following four models led to gross (but not net) savings:

    1. Comprehensive Care for Joint Replacement Model;
    2. Comprehensive End-Stage Renal Disease Care Model;
    3. Oncology Care Model; and
    4. Million Hearts: Cardiovascular Disease Risk Reduction Model.

These four models have been or will be phased out or replaced with enhanced models. For example, the Oncology Care Model ended in June 2022 but is being replaced by the Enhancing Oncology Model, which begins in July 2023. The full 2022 Report can be accessed here.

Insulin Price Cap

A price cap on copays for insulin for Medicare enrollees took effect January 1, 2023. Under the Inflation Reduction Act (“IRA”), the price of insulin copays is capped at $35/month for each insulin prescription that is covered by a Medicare Part D plan. For Medicare enrollees who use an insulin pump, which is covered by Medicare Part B, a $35 copay cap will begin on July 1, 2023. According to CMS, about 3.3 million Medicare Part D enrollees used insulin in 2020.

Just as important, the IRA allows the federal government, starting in 2026, to negotiate prices for some drugs covered under Medicare Part B and Part D. In addition, the IRA requires drug manufacturers to pay rebates to Medicare if prices rise faster than inflation for drugs used by Medicare beneficiaries.

The full text of the IRA can be found here and a PDF version here.

 

Alabama Court Reforms Reverse Mortgage and Foreclosure Deed Due to Mutual Mistake

Posted on by Christie Bowness

In Davis v. Reverse Mortgage Solutions, No. 2:20-cv-632-CWB, 2023 U.S. Dist. LEXIS 42496 (M.D. Ala. Mar. 14, 2023), the United States District Court for the Middle District of Alabama, Northern Division (“the Court”) recently granted summary judgment to the holder of a reverse mortgage who asserted claims for reformation of both the mortgage and a subsequent foreclosure deed on the grounds of mutual mistake.

Background

In the case, Plaintiff Adina Davis (“Plaintiff”) was the owner of property in Chilton County, Alabama (“the Property”).  The Property was originally owned by Plaintiff’s parents, who acquired title to the portion of the Property containing their residence in September 1973, and later, in December 1993, acquired title to a surrounding portion of the Property which they used for a yard and swimming pool.  These two portions were subsequently merged into a single tax parcel, with title then passing to Plaintiff’s father upon her mother’s October 2009 death.

In February 2015, Plaintiff’s father applied for a reverse mortgage against the Property with Defendant Reverse Mortgage Solutions (“RMS”), which was executed on July 2, 2015.  While it was not discovered until later, the metes and bounds description contained in the reverse mortgage described only the portion of the Property obtained in December 1993 and failed to include the September 1973 portion containing the residence.

In November 2018, Plaintiff’s father died, with the reverse mortgage loan subsequently falling into default and RMS conducting a foreclosure sale at which RMS was the highest bidder.  Consistent with the reverse mortgage, the metes and bounds description contained in the Foreclosure Deed encompassed only the December 1993 non-residence portion of the Property.  On July 6, 2020, Plaintiff asserted an ownership claim to the September 1973 portion of the Property and filed suit with the Court seeking a declaration of her ownership.

Specifically, Plaintiff contended that she was the fee simple owner of the September 1973 portion of the Property, citing the metes and bounds descriptions in both the reverse mortgage and foreclosure deed.  In response, RMS asserted a counterclaim seeking, among other things, to have the reverse mortgage and Foreclosure Deed reformed to describe both sections of the Property and accurately reflect the parties’ agreement and intent.

The Court’s Decision

Ultimately, RMS moved for and prevailed on summary judgment.  In granting RMS’s motion, the Court noted that it was “authorized to reform real estate documents in circumstances where—due to a mutual mistake—the executed documents fail to reflect the true intentions of the parties,” further observing that in doing so “[t]he burden lies with the party seeking reformation to prove such a mutual mistake by ‘clear, convincing, and satisfactory evidence.’”  The Court held that this burden had been met, as the reverse mortgage loan application, verification of occupancy executed therewith, appraisal, and resulting mortgage documents all included the residence in their description of the Property and stated that the reverse mortgage was intended to encumber the entirety of the Property.

In holding this burden had been met the Court also considered the fact that the type of FHA-insured reverse mortgage loan at issue was only available when secured by a borrower's principal residence.  Thus, based on the cumulative impact of these materials, the Court held that it had been clearly and convincingly shown that there was a mutual mistake regarding the exclusion of the September 1973 portion of the Property from the reverse mortgage, and that the documents should be reformed to include this portion of the Property.

As to the foreclosure deed, the Court found that it too should be reformed, relying upon precedent issued in Federal Land Bank of New Orleans v. Williams, a case in which the Alabama Supreme Court granted reformation of a mortgage when a survey discovered that the mortgage did not properly describe the parcel on which the borrower resided.  186 So. 689, 691 (Ala. 1938).  Therein, when the borrower raised the argument that “reformation should be confined to the mortgage, and should not embrace the foreclosure deed,” the Williams court confirmed that the mortgagee was entitled “to a decree of reformation both as to the mortgage and the foreclosure deed.”  Accordingly, citing to this decision, the Court held that the same result was appropriate and that, like the reverse mortgage, the foreclosure deed should also be reformed to include the September 1973 portion of the Property.

Takeaways

The primary takeaway from this case is that the Davis Court took a common-sense approach to determining whether the reverse mortgage should be reformed.  In determining whether the parcel on which the residence sat should have been included in the reverse mortgage’s description of the Property, the Court looked to the surrounding circumstances and documentation which clearly indicated that the parties were all aware that the portion of the Property containing the residence was to be encumbered.  Further, the Court looked to precedent that, in a very similar factual situation, the deed which relies upon a mortgage requiring reformation should likewise undergo corresponding reformation of its own.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, James Mazewski at jmazewski@riker.com, Kevin Hakansson at khakansson@riker.com or Kori Pruett at kpruett@riker.com.

DEA Extension of Telemedicine Prescribing and Latest DSH Allotments

Posted on by Jessica Civetta

DEA Proposes New Rules for Telehealth Prescribing of Controlled Substances

After loosening the in-person requirements in prescribing controlled substances (“CDS”) during COVID-19, the Drug Enforcement Administration ("DEA") has begun exploring new rules for the prescribing of CDS via telehealth modalities after the federal Public Health Emergency expires. Earlier this year, the DEA proposed new rules (88 FR 12875) narrowly addressing CDS prescriptions made during telehealth encounters in which the provider has not conducted a prior physical evaluation of the patient. For these types of telehealth-only encounters, CDS prescriptions would be limited to (i) a 30-day supply of Schedule III-V non-narcotic controlled medications; or (ii) a 30-day supply of buprenorphine for the treatment of opioid use disorder. Both exceptions are still subject to state law.

The proposed rulemaking reflects the DEA’s return to its pre-pandemic stance that an in-person patient evaluation is required for prescribing CDS. Accordingly, the proposed rulemaking would not affect telehealth encounters in which the prescriber has previously conducted an in-person evaluation of a patient. Additionally, the proposed rules would not apply to telehealth encounters that do not involve prescribing CDS.

However, following its receipt of 38,000 comments in response to its proposed telehealth CDS rulemaking, the DEA announced that it will temporarily extend the current telehealth flexibilities. It is currently unclear how long the DEA will extend the current telehealth flexibilities for prescribing CDS via telehealth without a prior in-person evaluation, as the temporary rule has not yet been published.

Latest DSH Allotments and IMD DSH Limits

On April 14, 2023, Centers for Medicare & Medicaid Services ("CMS") and U.S. Department of Health and Human Services ("HHS") published 88 FR 23049 and announced final allotments and limitations applicable for federal fiscal years ("FY") 2020 and 2021, and preliminary allotments for FY 2022 and 2023. The allotments are effective May 15, 2023. The federal share ("FS") amount of each state’s FY disproportionate share hospital ("DSH") payments to DSH hospitals are limited in the aggregate each fiscal year. This is represented by the state’s FY DSH allotment. The amount of such FY DSH allotment is calculated by increasing the amount of the state’s DSH allotment from the previous FY by the percentage change in the Consumer Price Index for all Urban Consumers ("CPI-U") for the prior FY.

All DSH allotments listed in the final rule assume that all states qualify for the temporary federal medical assistance percentage ("FMAP") increase under section 6008 of the Families First Coronavirus Response Act ("FFCRA") (Pub. L. 116-127, enacted March 18, 2020), for the period of January 1, 2020 through March 31, 2023. Such increase available during that time period is 6.2%. Qualifying states will receive a temporary FMAP increase for FY 2023 of 5% for the period of April 1, 2023, through June 30, 2023 and 2.5% for the period July 1, 2023, through September 30, 2023.

Escrow Agent’s Theft of Premium Payment Insufficient to Compel Provision of Title Coverage

Posted on by Christie Bowness

On April 25, 2023, the United States District Court for the Western District of Washington (“the Court”) issued its opinion in the matter of Ticor Title Company, et al., v. Kiavi Funding, Inc. No. 22-cv-832, LEXIS 72068 (W.D. Wash. Apr. 25, 2023), holding that the successful payment of a title insurance premium remains a condition precedent to a title insurer’s provision of coverage, even if the insured attempted to make the payment and an escrow agent wrongfully absconded with the funds.

Background

This matter concerned a loan refinance involving real property located in Everett, Washington, which was owned by Tang Real Estate Investments, Inc. (“Tang”), and on which Kiavi Funding, Inc. (“Kiavi”) held a Deed of Trust.  Tang and Kiavi agreed to refinance Tang’s loan, with Tang choosing to use the escrow agent Escrow Services of Washington LLC (“ESW”).  With Kiavi’s permission, ESW obtained a preliminary title commitment and a closing protection letter from Plaintiff Ticor Title Company (“Ticor”), the title agent for Commonwealth Land Title Insurance Company (“Commonwealth”).

During the closing process, ESW (the escrow agent) instructed Kiavi to wire both the loan funds and the title insurance policy premium directly to ESW, rather than to Ticor (the title agent).  Kiavi followed these instructions and did so, after which ESW then absconded with the loan and premium funds.  Kiavi never received the title insurance policy and Ticor never received payment of the policy premium.  Kiavi later sought a copy of the title insurance policy from Ticor and submitted a claim for coverage, with Commonwealth denying the claim “for failure of consideration because it had never received payment for the [P]olicy.”  Subsequently, Ticor and Kiavi brought suit before the Court seeking confirmation that the coverage denial was proper.

Summary Judgment

Ultimately, Ticor and Kiavi both moved for summary judgment, with the Court ruling in their favor and affirming the propriety of the coverage denial, holding that despite the “unfortunate [nature of the] case” the plain language of the title policy controlled.  In doing so, the Court first looked to the language of Ticor’s preliminary title commitment, which expressly required Kiavi to “[p]ay the premium, fees, and charges for the Policy” within 180 days of the commitment’s issuance.  As the payment of these costs was “a condition precedent to Plaintiffs’ liability and obligations” under the Policy, and as these costs were never paid, the coverage denial was proper.

While Kiavi attempted to claim that the closing protection letter provided a separate basis for “imposing contractual liability” and requiring the provision of coverage, the language of the letter clearly stated that it only protected against losses caused by the title agent (Ticor) or an “approved attorney,” neither of which classification encompassed ESW.  The Court thus held that coverage could not be compelled under the letter as it was ESW’s provision of wiring instructions that caused the loss of funds, and not the actions of Ticor.

Summary judgment was accordingly warranted, with the Court observing that although Kiavi had been the unfortunate “victim of the escrow agent’s misconduct,” its “failure to pay the premium constitute[d] a failure to satisfy a condition precedent” which rendered the title insurance policy void, and thus no duty to defend or indemnify was ever triggered.

Takeaways

This opinion reaffirms that even when faced with “unfortunate” facts and a party harmed through no fault of its own, the clear language of the policy will still control, and a court will still determine liability based upon the policy provisions.  It also confirms that a closing protection letter cannot impose contractual liability outside the bounds of the bargained-for contract and serves as a stark reminder to always follow best practices when sending wire transfers.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, James Mazewski at jmazewski@riker.com, Kevin Hakansson at khakansson@riker.com or Kori Pruett at kpruett@riker.com.

 

Texas Appellate Court Dismisses Fraud and Fiduciary Duty Claims Against Title Insurer and Title Agent

Posted on by Christie Bowness

On February 28, 2023, the Texas Third District Court of Appeals (“the Court”) entered its opinion in the matter of Houndstooth Capital Real Estate, LLC v. Maverick Title of Texas, LLC, No. 03-21-00093, LEXIS 1254 (Tex. App. 2023), confirming that title insurers are not fiduciaries to their insureds and that the contents of a title commitment cannot serve as the basis for a fraud or fraudulent inducement claim.

Background

This matter centered around real property located on East 16th Street in Austin, Texas (“the Property”), which was originally purchased by Sam Higgins (“Higgins”) in 1974.  On August 8, 2017, Higgins purportedly transferred ownership of the Property to the investment company CETA Invest Austin (“CETA”), with the transfer memorialized via the recordation of a warranty deed.  CETA subsequently entered into an agreement to sell the Property to Juanita William (“William”) for $200,000, who in turn, while the sale was pending, offered to assign her right to purchase the Property to Plaintiff Houndstooth Capital Real Estate, LLC (“Plaintiff”) for $205,000.  Plaintiff accepted William’s offer the same day it was made, September 20, 2017, and later that day Plaintiff, William, and CETA executed an assignment of purchase-and-sale-agreement rights.

The purchase closed on October 6, 2017 and a Commitment for Title Insurance (“the Commitment”) was issued by Maverick Title of Texas (“Maverick”), which was serving as a title agent for WFG National Title Insurance Company (“WFG”).  In the Commitment, WFG represented that it would only issue a title policy on the Property if multiple conditions precedent were met, one of which was the resolution of any “matter that may affect title to the land or interest insured, that arises or is filed after the effective date” of the Commitment.  Plaintiff subsequently placed $205,000 into escrow, CETA executed a deed transferring the Property to Plaintiff, and the escrow agent wired the funds to CETA’s account.

On October 13, 2017, Maverick was alerted that CETA was suspiciously attempting to withdraw the full amount of the settlement funds from its account, that CETA’s account had only recently been opened, and that all payment on the funds would be stopped due to fraud suspicions.  On October 18, 2017, Maverick informed Plaintiff that due to fraud no title policy would be issued, the funds that had been placed in escrow would not be returned, and the chain of title was now in question.  On October 27, 2017, Higgins signed a Fraud Affidavit stating that the deed conveying the Property to CETA was a forgery.

Plaintiff subsequently managed to recover $132,672.35 of its $205,000 transfer, later bringing suit against Maverick and WFG for numerous causes of action including fraud and breach of fiduciary duty.  The trial court ultimately granted Maverick and WFG summary judgment dismissing all claims raised against them, but failed to issue an opinion in which it “specif[ied] the basis for its judgment.”

The Appeal

Plaintiff then appealed with the Court affirming the trial court’s dismissal.  First, as to the fraud claim, the Court observed that the Commitment did not operate as a “representation of the state of the title” upon which Plaintiff could rely.  As a practical matter, Plaintiff had also taken assignment of the purchase contract with CETA prior to contacting WFG and thus, even if the Commitment could have been relied upon, due to the timing it could not have served as a means of inducing Plaintiff to make the purchase of the Property.  The Court also noted that Plaintiff had failed to satisfy the Commitment’s condition precedent of resolving any title issue that arose after the Commitment was effective, as Higgins’ Fraud Affidavit was never addressed.

The same was true for the fraud claims raised against Maverick.  The Court held that the Commitment’s statement that title “appeared” to be vested in CETA did not serve as an inducement for Plaintiff to purchase the Property or send escrow funds.  Because this representation occurred after Plaintiff was already under contract, and because Plaintiff could not identify any other representation upon which it had relied to enter the purchase transaction, Plaintiff had no basis for a fraud or fraudulent inducement claim and thus its fraud claims failed.

As to the allegations of breach of fiduciary duty, the Court observed that because Plaintiff had failed to satisfy the Commitment’s requirements, WFG never became Plaintiff’s title insurer and thus owed no duty.  Further, because title insurance is a contract of indemnity that gives rise to an indemnitor-indemnitee relationship only, WFG would never have stood in a fiduciary relationship to Plaintiff even had coverage been owed.  While title-insurance underwriters could be considered fiduciaries if they undertook to act as escrow agents, WFG never performed any escrow duties and the agency agreement between WFG and Maverick expressly stated that Maverick was not appointed as WFG’s agent for escrow services.  Thus, the Court held that Plaintiff’s breach of fiduciary duty claims failed.

The same was true for Maverick.  The Court held that Maverick did not owe a fiduciary duty to Plaintiff based upon its involvement as a title agent, performed all its services owed, and never undertook any duties associated with acting as an escrow agent.  Therefore, Plaintiff’s claims failed, and the trial court’s grant of summary judgment was affirmed.

Takeaways

This opinion reaffirms that the representations contained within a Title Commitment cannot serve as the basis for a fraud claim, that title insurers will not be considered fiduciaries unless they undertake to act outside the scope of their contract, and that a denial of coverage based upon an insured’s failure to satisfy the requirements of a Commitment will be upheld.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, James Mazewski at jmazewski@riker.com, Kevin Hakansson at khakansson@riker.com or Kori Pruett at kpruett@riker.com.

New Changes to Federal Self-Referral and Anti-Kickback Laws

Posted on by Christie Bowness

The federal prohibitions on self-referrals and kickbacks, known as the Stark Law and Anti-Kickback Statute (“AKS”), have received new changes for calendar year (“CY”) 2023. Significant among the changes are (1) a new Stark Law exception and AKS safe harbor for healthcare entities offering mental health programs to physicians, and (2) updated disclosure protocols for physician practices who failed to qualify as “group practices” as defined under the Stark Law.

Stark Law Exception for Physician-Focused Mental Health Programs

Section 4126 of the 2023 Consolidated Appropriations Act (P.L. No: 117-328) introduced a new Stark Law exception and AKS safe harbor for physician wellness programs. Under the exception and safe harbor, healthcare entities are allowed to provide certain mental and behavioral health programs to physicians and other clinicians.

Under the new exception, the program must be offered by a healthcare entity with a formal medical staff to all physicians who practice in the geographic area served by the entity. This includes physicians who hold bona fide staff appointments or clinical privileges at the entity. The program must further:

  1. Be offered on the same terms and conditions to all such physicians and without regard to the volume or value of referrals or other business generated by a physician for the entity;
  2. Consist of counseling, mental health services, a suicide prevention program, or a substance use disorder prevention and treatment program; and
  3. Have a written policy that includes a description of the program’s content and duration and evidence-based support for the design of the program, estimated cost of the program, personnel conducting the program, and a method for evaluating the program’s use and success.

The AKS safe harbor essentially mirrors the Stark Law exception. However, the new safe harbor also applies to non-physician clinicians, thereby permitting healthcare entities to provide bona fide mental health or behavioral health improvement or maintenance programs to physicians and other clinicians. Notably, however, the safe harbor does not statutorily apply to rural health clinics.

Although the text of the 2023 Consolidated Appropriations Act appears to make the exception and safe harbor immediately effective and was signed into law in December 2022, the corresponding provisions of the United States Code (“U.S.C.”) do not yet reflect the changes.

New Stark Law Disclosure Protocol – Failure to Qualify as a “Group Practice”

The Centers for Medicare & Medicaid Services (“CMS”) recently updated its Voluntary Self-Referral Disclosure Protocol (“SRDP”) to reflect new disclosure requirements for practices that fail to qualify as a “group practice” under the Stark Law. The SRDP is the self-reporting mechanism by which Medicare providers and suppliers can notify CMS of an actual or potential violation of the Stark Law, which may have resulted in an overpayment. Failure to qualify as a “group practice” under the meaning of the Stark Law may be a self-reportable event if the practice determines it improperly relied upon the group practice exception despite failing to meet the requisite criteria.

Effective March 1, 2023, with certain exceptions, self-disclosure for physician practices who failed to qualify as a group practice under 42 C.F.R. § 411.352 must include: (1) the SRDP Disclosure Form; (2) the Group Practice Information Form; (3) a Financial Analysis Worksheet; and (4) an acceptable Certification. Moreover, CMS has issued updated disclosure forms that require different information and supporting documentation than previous SRDP forms. Accordingly, a practice seeking to utilize the SRDP to report their failure to qualify as a group practice must use updated forms in support of their SRDP submission.

Additional information regarding the recent changes to the CMS SRDP may be found here.

Get Our Latest Insights

Subscribe