The Sixth Circuit Revives the Medicare Waiver of Liability for Overpayments and Appeals

When a provider or supplier of services bills the Medicare program and receives payment, but at a later date the program audits the claim and denies it, can the provider or supplier be relieved of any financial liability if it had a good faith belief that the service met all relevant coverage requirements, even when that belief is incorrect?

In a recent decision, the U.S. Court of Appeals for the Sixth Circuit ruled that this relief is possible, and that administrative adjudicators must conduct an analysis under the “hold harmless” provision of the Social Security Act (the “Act”).[1]

The Act is famously complex to read and comprehend. Added to that complexity are the hundreds of pages of regulations and hundreds more interpretations contained in subregulatory manuals and coverage determinations. Forty-five years ago, the U.S. Supreme Court described the Act as it existed at that time as “intricate” and “Byzantine.”[2] It’s not surprising that when providers and suppliers submit claims for Medicare reimbursement for their services, there are going to be times when they have a good faith belief that the service is covered or the regulations and rules are ambiguous, but the Centers for Medicare & Medicaid Services (“CMS”) ultimately denies the claim on the ground that the service was not reasonable and necessary. While there is a multi-step appeals process, even when an appeal is unsuccessful, the provider or supplier may not be liable financially if it can show that it “did not know, and could not reasonably have been expected to know, that payment would not be made” for that service.[3] The problem is that in practice, administrative adjudicators commonly reject these arguments, often without any explanation, or hold the provider or supplier to an extraordinarily high degree of knowledge of the Medicare rules.

In the case before the Sixth Circuit, a hospice provider received Medicare payment for services furnished to nine beneficiaries based in part on its certification that the beneficiaries were terminally ill. In 2020, the hospice was notified by a Medicare contractor that the claims did not meet the criteria in a Medicare Local Coverage Determination for determining whether a beneficiary is “terminally ill,” which is defined as a life expectancy of six months or less. The Sixth Circuit agreed with CMS that there was substantial evidence to support a denial of the claims, but disagreed with CMS that the waiver of liability provision did not apply, and remanded the case to the agency. The court explained that neither CMS nor the Administrative Law Judge who heard the hospice’s appeal had ever applied the criteria in the Medicare regulations for determining whether the hospice had notice that its claims would be denied, which include (1) publications from CMS or CMS contractors addressing the services in dispute, (2) Federal Register notices about the issue, or (3) knowledge of the accepted practices among the local medical community.[4] The final agency decision also did not address whether the hospice had reasonably interpreted the notice that was available and concluded that the service was covered, even if the Secretary of Health and Human Services (“Secretary”) ultimately disagreed.

Providers and suppliers who submit Medicare claims should always familiarize themselves with the relevant laws, regulations, and published guidance that apply to their claims. Yet, even with some diligence, those authorities and guidance may not answer a particular question. In addition, when there is some guidance from CMS or a contractor, that guidance may be silent or ambiguous on a given issue. For example, in this appeal, the Medicare coverage determination did not explain how a clinician would go about determining that a beneficiary had a life expectancy of six months or less. A given assessment may be more complicated if a coverage question turns on multiple factors, which increases the chances of a more subjective decision. Other considerations may involve the change in the course of an illness over time, whether the service is relatively new among the professional community, or if there are multiple options for treatment and the clinician must rely on experience and professional judgment.

Requiring that an administrative adjudicator conduct a thorough analysis of a waiver of liability question does not undercut the Secretary’s delegated authority to make coverage determinations, but does give providers and suppliers a more effective tool with which to avoid financial liability when there is an honest difference of opinion. When such questions do arise, the availability of a waiver should be an additional response to any denial of coverage, and should be raised as early as possible in the audit or appeal process.  

If you have questions, please contact the author of this post or your regular EBG attorney(s).

Endnotes

[1] In Home Health, LLC v. Kennedy, 2026 WL 2147418 (6^th Cir., July 27, 2026); also available at: https://www.opn.ca6.uscourts.gov/opinions.pdf/26a0205p-06.pdf.

[2] Schweiker v. Gray Panthers, 453 U.S. 34, 43 (1981).

[3] 42 U.S.C. § 1395pp(a)(2).

[4] 42 C.F.R. § 411.406(e).

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The Health Law Advisor blog is currently edited by Emily Chi Fogler.