Atlanticare Medical Center v. Division of Medical Assistance

• Court: Massachusetts Supreme Judicial Court
• Decided: July 21, 2020
• Docket: SJC 12828
• Status: Published

Opinion

NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557- 1030; SJCReporter@sjc.state.ma.us

SJC-12828

ATLANTICARE MEDICAL CENTER & others1 vs. DIVISION OF MEDICAL ASSISTANCE.

Suffolk. February 10, 2020. - July 21, 2020.

Present: Gants, C.J., Lenk, Gaziano, Lowy, Budd, Cypher, & Kafker, JJ.

Medicaid. Division of Medical Assistance. Public Welfare, Medical assistance benefits. Regulation. Hospital, Medicaid reimbursement. Medicare. Judgment, Relief from judgment. Practice, Civil, Relief from judgment.

Civil action commenced in the Superior Court Department on April 6, 2000.

Following review by this court, 439 Mass. 1 (2003), a motion for relief from judgment, filed on September 28, 2018, was heard by Debra A. Squires-Lee, J.

The Supreme Judicial Court granted an application for direct appellate review.

Douglas S. Martland, Assistant Attorney General, for the defendant. Charlene E. Kent for the plaintiffs.

1 Salem Hospital; Lawrence General Hospital; Hale Hospital; Beverly Hospital; and Deaconess Waltham Hospital. 2

KAFKER, J. In the instant case we are asked to revisit a

decision issued by this court in 2003 involving State Medicaid

reimbursements, in light of subsequent developments to the

relevant Federal law. At issue is the State's Medicaid program,

MassHealth, which provides insurance for indigent residents of

the Commonwealth.2 In Atlanticare Med. Ctr. v. Commissioner of

the Div. of Med. Assistance, 439 Mass. 1, 3, 5 (2003)

(Atlanticare I), this court affirmed a judgment declaring that

part of a State Medicaid regulation, 130 Code Mass. Regs.

§ 450.316(E) (1998),3 was inconsistent with the Federal Medicaid

scheme. The regulatory provision required health care providers

to return payments to MassHealth where a third-party insurer was

later identified as liable for the payment that MassHealth had

already paid out. Id. at 2. We concluded that the Federal

Medicaid scheme tasked the State Medicaid agency, not individual

providers, with seeking reimbursement from liable third-party

2 At the time the original complaint was filed, the Division of Medical Assistance was designated as the "single State agency" responsible for administering the State Medicaid plan. See 42 U.S.C. § 1396a(a)(5) (State Medicaid plans must designate single State agency to administer plan). In 2003, however, the Executive Office of Health and Human Services was deemed to be the single State agency responsible for administration of the program. See G. L. c. 118E, § 1, inserted by St. 2003, c. 26, § 308. For simplicity, we will refer to the defendant as "MassHealth" throughout this opinion.

3 The provision at issue in this regulation has since been moved from subsection (E) to subsection (F) of 130 Code Mass. Regs. § 450.316 (2019). 3

insurers, including Medicare. Id. at 6-7. We thus held that

the State regulation impermissibly shifted the burden for

seeking reimbursement onto health care providers, in violation

of the Federal statutory scheme. Id. at 14. In so holding, we

rejected the argument that MassHealth would be unable to

directly seek reimbursement where the liable third party at

issue was Medicare. Id. at 11.

Pursuant to our ruling in Atlanticare I, MassHealth began

seeking reimbursements directly from Medicare, rather than from

providers, where Medicare was identified as a liable third-party

insurer. The Center for Medicare & Medicaid Services (CMS), a

division of the Department of Health and Human Services (HHS)

that oversees the administration of Medicaid and Medicare at the

Federal level, refused to issue reimbursements from Medicare to

MassHealth, however. See Daley v. Secretary of the Executive

Office of Health & Humans Servs., 477 Mass. 188, 190 (2017);

Massachusetts v. Sebelius, 638 F.3d 24, 25 (1st Cir. 2011)

(Sebelius). CMS maintained that Medicare funds could only be

paid out to providers, not MassHealth, and that MassHealth could

only obtain Medicare reimbursements by going through providers.

Sebelius, supra. MassHealth brought suit against CMS in Federal

court, challenging this position. Id. at 29. In a 2011 ruling,

the United States Court of Appeals for the First Circuit agreed

with CMS's position, and held that the Federal Medicare scheme 4

prohibited State Medicaid agencies, including MassHealth, from

receiving funds from Medicare. See id. at 36. At around the

same time, a Federal Medicare regulation was amended to

acknowledge the practice of State Medicaid agencies obtaining

Medicare reimbursements through providers, rather than seeking

such reimbursements directly from Medicare. See 42 C.F.R.

§ 424.44(b)(3) (2019).

In light of the First Circuit's holding and the amendment

to 42 C.F.R. § 424.44(b), MassHealth sought to modify the

declaratory judgment and restore MassHealth's ability to obtain

reimbursements from providers, rather than liable third parties.

For the reasons discussed infra, we conclude that MassHealth has

demonstrated a sufficient change in circumstances to warrant

modification of the judgment. We further conclude, however,

that only a narrow modification of the judgment is necessary to

allow MassHealth to seek reimbursement where the liable third

party is Medicare. Accordingly, we order that this case be

remanded to the Superior Court for modification of the judgment

in accordance with this opinion.

1. Background. a. Overview of Medicaid and Medicare.

Medicare is a Federal program that provides health care benefits

to the elderly and disabled. See Briggs v. Commonwealth, 428

Mass. 241, 243 (1999); 42 U.S.C. §§ 1395 et seq. Medicare is

supported entirely by Federal funds and is administered by the 5

Federal government. See Briggs, supra. Medicaid, by contrast,

is a health care program designed to assist the needy and

indigent. See id.; 42 U.S.C. § 1396 et seq. Unlike Medicare,

Medicaid follows a model of "cooperative federalism" between the

State and Federal governments (citation omitted). See Harris v.

McRae, 448 U.S. 297, 308 (1980) (McRae). State participation in

Medicaid is voluntary, but those States that choose to

participate must develop a State plan in compliance with Federal

requirements. See Massachusetts Eye & Ear Infirmary v.

Commissioner of the Div. of Med. Assistance, 428 Mass. 805, 812

(1999). State Medicaid plans must comply with requirements set

forth in the Federal statutory scheme, as well as Federal

regulations promulgated by HHS. See id. In exchange, "the

Federal Government agrees to pay a specified percentage of 'the

total amount expended . . . as medical assistance under the

State plan . . . ." McRae, supra, quoting 42 U.S.C.

§ 1396b(a)(1). Although States must comply with Federal

requirements, Medicaid is designed to provide some flexibility

to the States to formulate a plan tailored to each State's

individual needs. See Danvers Pathology Assocs., Inc. v.

Atkins, 757 F.2d 427, 428 (1st Cir. 1985).

Eligibility for Medicaid and Medicare are not mutually

exclusive. An individual who is both elderly and indigent may

be "dual eligible[]" for both programs. See Briggs, 429 Mass. 6

at 244. See also Connecticut Dep't of Social Servs. v. Leavitt,

428 F.3d 138, 141 (2d Cir. 2005) (Leavitt) ("Because elderly

Americans are covered by Medicare, and poor Americans are

covered by Medicaid, the elderly poor are covered by both

programs. These beneficiaries are known as 'dual eligibles'").

Where an individual is dual eligible, and receives a health care

service that could be covered by either Medicare or Medicaid,

Medicare is to pay in the first instance. See Leavitt, supra;

42 U.S.C. § 1396a(a)(25)(A). This is because Medicaid is

designed to be a "payer of last resort." Arkansas Dep't of

Health & Human Servs. v. Ahlborn, 547 U.S. 268, 291 (2006).

Under this principle, Medicaid is not to be used to fund a

health care expense where another funding resource is available.

Shweiri v. Commonwealth, 416 Mass. 385, 388–389 (1993). The

Federal statutory and regulatory scheme outlines two methods for

ensuring that Medicaid remain the payer of last resort where

another funding resource is identified: "cost avoidance" and

"pay and chase." See Miller v. Gorski Wladyslaw Estate, 547

F.3d 273, 278 (5th Cir. 2008).

i. Cost avoidance. Cost avoidance is the primary method

of ensuring that Medicaid funds are not used where another

funding resource is available. See id. States are required to

"take all reasonable measures to ascertain the legal liability

of third parties . . . to pay for care and services available 7

under the plan" before paying out Medicaid funds. See 42 U.S.C.

§ 1396a(a)(25)(A). A third party is defined as "any individual,

entity or program that is or may be liable to pay all or part of

the expenditures for medical assistance furnished under a State

plan." 42 C.F.R. § 433.136 (2010). Reasonable measures include

the submission of a plan to the Secretary of HHS "for pursuing

claims against such third parties." 42 U.S.C.

§ 1396(a)(25)(A)(ii). In accordance with these requirements,

Massachusetts has promulgated a regulation mandating that

providers make "diligent efforts to obtain payment first from

other resources . . . so that the MassHealth agency will be the

payer of last resort." 130 Code Mass. Regs. § 450.316 (2019).

Where a State is able to establish the "probable existence"

of third-party liability at the time when a claim is filed, "the

agency must reject the claim and return it to the provider for a

determination of the amount of liability." 42 C.F.R.

§ 433.139(b)(1) (2019). Once such a liability determination is

made, "the agency must then pay the claim to the extent that

payment allowed under the agency's payment schedule exceeds the

amount of the third party's payment." 42 C.F.R.

§ 433.139(b)(1). Where probable third-party liability cannot be

established, or where benefits are not available at the time the

claim is filed, the State Medicaid agency is responsible for

paying the claim. See 42 C.F.R. § 433.139(c). 8

ii. Pay and chase. In the regular course, the

Commonwealth's "diligent efforts" requirement ensures that

MassHealth does not pay for health care services that could have

been paid for by a third-party insurer. See 130 Code Mass.

Regs. § 450.316. Instances arise, however, where a liable third

party is identified after Medicaid has already paid the

provider. For example, individuals who are eligible for

Medicaid may become retroactively eligible for Medicare as well.

See, e.g., 42 C.F.R. § 406.6(d)(4) (2019) (individual who signs

up for Medicare Part A coverage at some point after he or she

first becomes eligible is entitled to retroactive benefits).

Such individuals are referred to as "retroactive dual

eligibles." In such instances, Medicaid employs the secondary

"pay and chase" method of handling third-party liability, which

consists of the following:

"in any case where such a [third-party] legal liability is found to exist after medical assistance has been made available on behalf of the individual and where the amount of reimbursement the State can reasonably expect to recover exceeds the costs of such recovery, the State or local agency will seek reimbursement for such assistance to the extent of such legal liability."

42 U.S.C. § 1396a(a)(25)(B).

Federal regulations further mandate that

"if [a State Medicaid] agency learns of the existence of a liable third party after a claim is paid, or benefits become available from a third party after a claim is paid, the agency must seek recovery of reimbursement within [sixty] days after the end of the month it learns of the 9

existence of the liable third party or benefits become available."

42 C.F.R. § 433.139(d)(2).4 Reimbursement is to be sought

"unless the agency determines that recovery would not be cost

effective in accordance with" 42 C.F.R. § 433.139 (f). 42

C.F.R. § 433.139(d)(3). Recovery is considered cost effective

under 42 C.F.R. § 433.139(f) where "the amount [the State

Medicaid agency] reasonably expects to recover will be greater

than the cost of recovery." 42 C.F.R. § 433.139(f)(1). A

State's Medicaid "plan must specify the threshold amount or

other guideline that the agency uses in determining whether to

seek recovery of reimbursement from a liable third party, or

describe the process by which the agency determines that seeking

recovery of reimbursement would not be cost effective." 42

C.F.R. § 433.139(f)(2).

iii. Approaches to pay and chase. To address the

implementation of pay and chase for instances of post-payment

4 A State agency may request a waiver of the sixty-day deadline for seeking reimbursement. See 42 C.F.R. § 433.139(e)(1). In order to obtain a waiver of this requirement, however, a State agency must demonstrate that imposing the sixty-day requirement is not cost effective. See 42 C.F.R. § 433.139(e)(1). In order to do so, the agency must provide "adequate documentation" to the Center for Medicare & Medicaid Services (CMS) as to the lack of cost effectiveness, examples of which include "costs associated with billing, claims recovery data, and a State analysis documenting a cost-effective alternative that accomplishes the same task." 42 C.F.R. § 433.139(e)(1)(ii). 10

third-party liability, Massachusetts promulgated the following

regulation: "[i]f a third-party resource is identified after

the provider has already billed and received payment from the

MassHealth agency, the provider must promptly return any payment

it received from the MassHealth agency. The provider must bill

all third-party resources before resubmitting a claim to the

MassHealth agency." 130 Code Mass. Regs. § 450.316(F). In

other words, this regulation implements pay and chase by

allowing MassHealth to void a provider's claim and recoup the

money from the provider. The provider is then left to seek

payment from the third party itself, whether the third party is

a private insurer or Medicare. The instant litigation arose out

of a challenge to the legality of this regulation.

An alternative method for implementing pay and chase, and

the one that MassHealth presently relies on, is known as demand

billing. Under this method of recovery, MassHealth requests

that the provider submit a bill to Medicare and repay MassHealth

once Medicare has paid the provider. MassHealth contends that

demand billing results in significant delays in recovery, and

cannot be utilized where a Medicaid recipient becomes

retroactively eligible for Medicare more than twelve months

after the date of service, due to Medicare filing deadlines.

b. Procedural history. i. Initiation of suit and

Atlanticare I. In 1998, MassHealth brought enforcement actions 11

against the plaintiff hospitals, seeking reimbursement for

Medicaid funds that had been paid out to the providers.

Atlanticare I, 439 Mass. at 4-5. As this court explained:

"In the three years prior to [MassHealth]'s enforcement action, each hospital had provided medical services to individuals deemed eligible for Medicaid benefits. It is undisputed that, in all but two instances not at issue here, the hospitals made diligent efforts to identify liable third-party insurers, in conformity with [MassHealth]'s due diligence regulation. When the hospitals were unable to identify liable third-party insurers, they sought and received payment from [MassHealth]. Subsequently, in 1998, [MassHealth] informed the hospitals that it had identified third parties responsible for the claims, and, pursuant to the reimbursement regulation, ordered the hospitals to return the Medicaid payments to [MassHealth] and to rebill the liable third parties. In some instances, Medicare was the newly discovered third party; the patients serviced by the hospitals in those instances had become retroactively eligible for Medicare benefits. In those instances, no amount of 'diligent efforts' by the healthcare providers would have identified a liable third-party insurer -- Medicare -- as Medicare provided the insurance coverage retroactively, i.e., only after the healthcare services had been provided. The remaining instances involved private insurers."

Id. MassHealth prevailed in the administrative decisions that

ensued. See id. at 5. The hospitals sought review in Superior

Court, arguing that Federal law mandated that the State Medicaid

agency, rather than the health care provider, seek reimbursement

from liable third parties. Id. at 3, 5. A judge in the

Superior Court ruled in favor of the hospitals. Id. at 3. In

so ruling, the judge "declared the regulation unlawful to the

extent that it required the hospitals to return payments to 12

[MassHealth] and rebill liable third parties." Id. at 5.

MassHealth appealed, and this court transferred the case from

the Appeals Court on its own motion. Id. at 3.

In March 2003, we issued a decision affirming the Superior

Court's ruling and concluding that Federal law required

MassHealth to seek reimbursements directly from liable third

parties, including Medicare. See id. at 5. We held that "[t]he

natural reading of the text of [42 U.S.C.] § 1396a(a)(25)(B) is

that the State or local agency must seek reimbursement from a

liable third party, provided it is cost effective to do so."

Id. at 6. We also based our holding on the legislative history,

the corresponding Federal regulation, and the then-current 1990

State Medicaid manual issued by the Health Care Financing

Administration (HCFA).5 Id. at 8-10. More specifically, we

observed that 42 U.S.C. § 1396a(a)(25)(B) made numerous

references to liable third parties, but made no mention of

providers. Atlanticare I, supra at 6-7. The statute's

legislative history also indicated that Congress contemplated

seeking reimbursement from "liable third parties" (emphasis

omitted). Id. at 8. The cost-benefit analysis mandated by the

statute further implied that agencies would seek recovery from

5 The Health Care Financing Administration was the predecessor to CMS. Massachusetts v. Sebelius, 638 F.3d 24, 28 n.6 (1st Cir. 2011). 13

third parties, as the cost of seeking recovery from a provider

would generally be de minimis. Id. at 7. Additionally, the

corresponding Federal regulations made explicit reference to

seeking reimbursement "from a liable third party" and similarly

contained cost-benefit analysis provisions (emphasis omitted).

Id. at 9. Finally, the 1990 HCFA manual set forth a pay and

chase method of reimbursement that required the State Medicaid

agency to "seek recovery of reimbursement from the third party"

(emphasis omitted). Id. at 10.

On this basis, we concluded that 42 U.S.C.

§ 1396a(a)(25)(B) required State Medicaid agencies to seek

reimbursement directly from the liable third party, not the

health care provider. Atlanticare I, 439 Mass. at 6-7. We

further stated that this interpretation of the statute "would be

entirely unremarkable were it not for [MassHealth's] view,

agreed to by the hospitals, that it cannot recover costs from

the liable third party when that party is Medicare." Id. at 11.

This court explicitly rejected that view, as we were "not

persuaded that it is impossible for [MassHealth] to obtain

reimbursement from Medicare." Id.

ii. Post-Atlanticare I developments. A few weeks after

this court released its decision in Atlanticare I, CMS issued a

letter from the State Medicaid director clarifying CMS's policy

as to the recovery of Medicaid payments for individuals who 14

become retroactive dual eligibles. The letter indicated that,

as a general matter, where Medicaid learns of a liable third

party after a claim is paid, or where retroactive benefits

become available after a claim is paid, State Medicaid agencies

"must seek recovery from that third party." The letter went on

to explain, however, that where the liable third party is

Medicare, neither the Federal statutory scheme nor Federal

regulations prohibit a State Medicaid agency from recovering its

payment directly from the provider. The defendant promptly

filed a petition for rehearing with this court in May 2003,

citing to the April 2003 letter from CMS. The petition was

denied without further comment.

CMS sent a letter dated December 30, 2003, to MassHealth in

response to questions that MassHealth had posed to the agency.

The letter explained CMS's position that the statute does

require the State to seek recovery from the liable third party,

but that where the liable third party is Medicare "there is no

statutory authority under Medicare to allow a [S]tate to seek

recovery and be paid directly from Medicare." In such

instances, CMS wrote, "the [S]tate may timely request the

provider to submit a bill timely to Medicare."

MassHealth filed an emergency motion to modify the

declaratory judgment, in light of the April 2003 and December

2003 letters from CMS, arguing that they constituted changed 15

circumstances warranting a modification of the declaratory

judgment, pursuant to Mass. R. Civ. P. 60 (b) (5), 365 Mass. 828

(1974).6 The Superior Court judge denied the motion, concluding

that none of the arguments advanced by the defendant

"establishes to this [c]ourt's satisfaction that there is no

possible way for [MassHealth] to recover from Medicare." The

judge also concluded that MassHealth's proposed modification to

the declaratory judgment was not suitably tailored to the

changed circumstance, because it "does not resolve the problem,"

but simply shifts the administrative costs from MassHealth onto

the providers.

In July 2004, a declaratory judgment was entered in the

Superior Court after rescript which provided in relevant part:

"It is further DECLARED that [MassHealth] lacks the authority to implement 130 Code Mass. Regs. § 450.316(E) [now renumbered § 450.316(F)] to the extent that the regulation, by requiring hospitals to refund Medicaid payments to [MassHealth] after the hospitals have complied

6 Rule 60 provides in relevant part:

"On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons: . . . (5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application . . . . The motion shall be made within a reasonable time . . . . A motion under this subdivision (b) does not affect the finality of a judgment or suspend its operation."

Mass. R. Civ. P. 60 (b), 365 Mass. 828 (1974). 16

with [MassHealth]'s due diligence regulation (130 Code Mass. Regs. § 450.316) and received payment for their services from [MassHealth] and [MassHealth] subsequently learns that a third-party insurer (including Medicare) is responsible for payment for all or part of the hospital's services, is inconsistent with the Supreme Judicial Court's interpretation of 42 U.S.C. § 1396a(a)(25)(B)."

iii. First Circuit decision. Subsequent to these

proceedings, MassHealth attempted to recover reimbursements for

retroactive dual eligibles directly from Medicare. See

Sebelius, 638 F.3d at 25. CMS refused to reimburse MassHealth,

however, maintaining its position that MassHealth must seek such

reimbursements from providers, not Medicare. Id. The

Commonwealth brought suit in Federal court. See id. A judge in

the Federal District Court for the District of Massachusetts

ruled that the Medicare statute prohibited MassHealth from

recovering reimbursements directly from CMS. Id.

On appeal, the First Circuit affirmed the District Court's

ruling. In so doing, it emphasized that the Medicare statute

required that a Medicare "payment for services furnished an

individual may be made only to providers of services." Id. at

31, quoting 42 U.S.C. § 1395f(a). Although recognizing that the

statute was not explicit on "whether the Commonwealth, which is

not a provider, may recover reimbursement directly from Medicare

in cases of retroactive dual eligibility," the First Circuit

concluded that "[i]n this statutory context, it is most natural

to read reimbursement as a particular type of payment." 17

Sebelius, 638 F.3d at 31, 32. As "[t]he Medicare statute

equates reimbursement and payment and does not allow non-

providers to receive payments from Medicare," the Commonwealth

could not recover directly from Medicare. Id. at 31. The First

Circuit further noted that the Commonwealth "is not included

among any of the express allowances in the Medicare statute for

non-providers to receive payments." Id.

The First Circuit also provided an "alternative holding"

that CMS's interpretation of its regulations as prohibiting

direct reimbursement to State Medicaid agencies was entitled to

deference. Sebelius, 638 F.3d at 33. In this regard, the First

Circuit had a much more expansive record of the agency's

interpretation than was presented to this court, including the

letter dated December 2003, which stated that "there is no

statutory authority under Medicare to allow a State to seek

recovery and be paid directly from Medicare," as well as a

letter from CMS to the Commonwealth dated June 2005 that

reiterated that "there is no statutory authority for reimbursing

Medicaid directly for services rendered to Medicare

beneficiaries." Id. at 34.

Given the statutory language and CMS's regulatory guidance,

the First Circuit determined that the Commonwealth could not

seek direct reimbursement from Medicare but would instead need

to utilize another means of recovery. The First Circuit 18

determined that the Commonwealth could nonetheless recover

reimbursements "by asking providers to return [S]tate Medicaid

funds," as the Federal statutory scheme did not preclude

MassHealth from doing so. Id. at 32. This procedure, known as

demand billing, was apparently raised by CMS as a viable

alternative to direct reimbursement from Medicare. See id. at

34. The First Circuit also considered "CMS bound by its

representation as to the mechanisms available for the

Commonwealth to seek and recover reimbursement." Id. at 36.

In the wake of the First Circuit's decision, MassHealth

began using demand billing to address the issue of retroactive

dual eligibles. As discussed, under this method of recovery,

MassHealth requests that the provider submit a bill to Medicare

and repay MassHealth once Medicare has paid the provider.

According to MassHealth, this solution works, but only to a

point. Because Medicare requires that providers submit claims

within twelve months of the date of service, MassHealth asserts

that it cannot rely on demand billing where a Medicaid recipient

becomes retroactively eligible for Medicare more than twelve

months after the day of service, unless the State first voids

the Medicaid payment.

iv. Amendment of Medicare regulation. A few months before

the First Circuit issued its decision, a Federal Medicare

regulation pertaining to the deadline for filing certain 19

Medicare claims was amended, effective January 1, 2011.7 The

amendment followed the passage of the Affordable Care Act, which

had altered Medicare filing deadlines.8 See Pub. L. No. 111-148,

7 The regulation applies to both services furnished under Part A of Medicare as well as services furnished under Part B, where applicable. See 75 Fed. Reg. 73170, 73450 (Nov. 29, 2010). See Briggs v. Commonwealth, 429 Mass. 241, 243 (1999) ("Medicare Part A essentially covers hospital, post-hospital, and other inpatient services, and coverage is automatic. . . . Medicare Part B is a supplemental, voluntary insurance program providing coverage for physician and outpatient services" [citation and footnote omitted]).

8 In their entirety, the two filing exceptions under 42 C.F.R. § 424.44(b)(2)-(b)(3) (2019) provide:

"(2) The time for filing a claim will be extended if CMS or one of its contractors determines that a failure to meet the deadline in paragraph (a) of this section is caused by all of the following conditions:

"(i) At the time the service was furnished the beneficiary was not entitled to Medicare.

"(ii) The beneficiary subsequently received notification of Medicare entitlement effective retroactively to or before the date of the furnished service.

"(3) The time for filing a claim will be extended if CMS or one of its contractors determines that a failure to meet the deadline in paragraph (a) of this section is caused by all of the following conditions:

"(i) At the time the service was furnished the beneficiary was not entitled to Medicare.

"(ii) The beneficiary subsequently received notification of Medicare entitlement effective retroactively to or before the date of the furnished service. 20

§ 6404(a)(1), 124 Stat. 767 (2010). The regulatory amendments

allowed for new exceptions to the Medicare filing deadline in

light of these statutory changes.

The first exception provides that the filing deadline will

be extended if the failure to meet the deadline is due to the

fact that: "(i) [a]t the time the service was furnished the

beneficiary was not entitled to Medicare;" and "(ii) [t]he

beneficiary subsequently received notification of Medicare

entitlement effective retroactively to or before the date of the

furnished service." 42 C.F.R. § 424.44(b)(2). In such

"(iii) A State Medicaid agency recovered the Medicaid payment for the furnished service from a provider or supplier 6 months or more after the service was furnished."

The extensions afforded to each exception are as follows:

"(ii) If CMS or one of its contractors determines that both of the conditions are met in paragraph (b)(2) of this section but that all of the conditions in paragraph (b)(3) are not satisfied, the time to file a claim will be extended through the last day of the sixth calendar month following the month in which either the beneficiary or the provider or supplier received notification of Medicare entitlement effective retroactively to or before the date of the furnished service.

"(iii) If CMS or one of its contractors determines that all of the conditions are met in paragraph (b)(3) of this section, the time to file a claim will be extended through the last day of the sixth calendar month following the month in which the State Medicaid agency recovered the Medicaid payment for the furnished service from the provider or supplier."

42 C.F.R. § 424.44(b)(5). 21

instances, the filing deadline will be extended six months from

the date that the beneficiary or provider is notified of

retroactive Medicare entitlement. 42 C.F.R. § 424.44(b)(5)(ii).

The second exception provides that the filing deadline will

be extended if the failure to meet the deadline is due to the

above two conditions, along with a third condition: that the

"State Medicaid agency recovered the Medicaid payment for the

furnished service from a provider or supplier [six] months or

more after the service was furnished" (emphasis added). 42

C.F.R. § 424.44(b)(3). In such instances, the filing deadline

will be extended six months from the date "in which the State

Medicaid agency recovered the Medicaid payment for the furnished

service from the provider or supplier" (emphasis added). 42

C.F.R. § 424.44(b)(5)(iii). The reference to providers in 42

C.F.R. § 424.44(b)(3) explicitly contemplates that State

Medicaid agencies will recover a payment from a health care

provider where an individual becomes retroactively dual eligible

for Medicaid and Medicare. This particular exception to the

filing deadline is designed to allow for providers to recover

from Medicare in such instances, where their claim would

otherwise be barred by the passage of time. The Commonwealth

contends that our ruling in Atlanticare I, which requires

MassHealth to seek reimbursement directly from Medicare, not the

provider, precludes the use of this procedure. 22

v. Proceedings leading to the instant appeal. On

September 28, 2018, the defendant filed a motion for relief from

the judgment in light of the First Circuit's decision and the

regulatory amendment to 42 C.F.R. § 424.44. The motion was

denied. The defendant appealed, and we granted the defendant's

application for direct appellate review.

MassHealth seeks a modification of the declaratory judgment

such that it may seek reimbursements from providers, rather than

continuing to seek reimbursements directly from Medicare and

other liable third parties.9 The agency estimates that it is

unable to recover approximately $5.3 million per year in claims

that should have been paid out by Medicare once a recipient's

retroactive dual eligibility became known. MassHealth also has

indicated that it is unaware of any State that faces the same

prohibition on recovering Medicaid payments directly from

providers.10

9 Although MassHealth requests the ability to seek reimbursement from providers as a general matter, MassHealth contends that such a modification of the judgment would have "little, if any" impact on providers where the third-party insurer is not Medicare. This is because MassHealth already has a direct right of recovery against non-Medicare insurers under G. L. c. 118E, § 22, and MassHealth contends that it has a general practice of seeking payment directly from the private insurers themselves, rather than from providers.

10CMS apparently represented to the First Circuit that the "standard procedure across the country" for recovering reimbursements from Medicare is to employ demand billing. 23

The agency contends that, in light of the First Circuit's

ruling, it has been placed in an untenable position of

attempting to follow two contradictory holdings: this court's

ruling in Atlanticare I that MassHealth must seek reimbursements

directly from liable third parties, and the First Circuit's

ruling that MassHealth is prohibited from seeking reimbursements

directly from Medicare.

2. Discussion. a. Standard of review. The defendant

seeks a modification of the declaratory judgment pursuant to

Mass. R. Civ. P. 60 (b) (5). Rule 60 (b) (5) allows the court

to relieve a party from a final judgment where "a prior judgment

upon which it is based has been reversed or otherwise vacated,

or it is no longer equitable that the judgment should have

Sebelius, 638 F.3d at 36 n.13. By contrast, MassHealth asserts that it is aware of nine other States that seek reimbursement directly from the provider where Medicare is the retroactively liable third party: Maine, Vermont, California, Ohio, Pennsylvania, Alabama, Wyoming, Michigan, and Minnesota. MassHealth has further indicated that it is unaware of any State that requires its State Medicaid agency to seek reimbursements from Medicare directly.

It would appear, however, that a few States do in fact require their State Medicaid agency to pursue Medicare directly. See Tex. Government Code § 531.0392 (b) (2020) ("The commission shall obtain Medicaid reimbursement from each fiscal intermediary who makes a payment to a service provider on behalf of the Medicare program"). See also South Dakota Admin. Rules § 22:02:02:10 (2020) ("[A] county must pursue the availability of a third-party payment source . . . such as Medicare"). Exactly how that is done is not clear from the record or the regulatory language. 24

prospective application." As the 1973 Reporter's Notes

indicate, Rule 60 (b) (5) is designed to allow "relief from a

judgment which was valid and equitable when rendered but whose

prospective application has, because of changed conditions,

become inequitable." Reporters' Notes (1973) to Rule 60, Mass.

Ann. Laws Court Rules, Rules of Civil Procedure (LexisNexis

2019). The rule "derives from the traditional power of a court

of equity to modify its decree in light of changed

circumstances." Mitchell v. Mitchell, 62 Mass. App. Ct. 769,

778 (2005). The moving party thus bears the burden of

demonstrating a "significant change in circumstances warranting

revision" of the judgment (quotations and citation omitted).

Great Woods, Inc. v. Clemmey, 89 Mass. App. Ct. 788, 795 (2016).

See MacDonald v. Caruso, 467 Mass. 382, 388-389 (2014). One

example of such changed circumstances would be a "later change

in the law[,] such as when a statute is amended." Clean Harbors

of Braintree, Inc. v. Board of Health of Braintree, 415 Mass.

876, 884–885 (1993). See Horne v. Flores, 557 U.S. 433, 447-448

(2009) (under Federal analog, changed circumstances, such as

"changes in governing law or its interpretation by the courts,"

may "warrant reexamination of the original judgment").

The resolution of motions for relief from judgment "rests

in the discretion of the trial judge." Wojcicki v. Caragher,

447 Mass. 200, 209 (2006). Accordingly, the "denial of a motion 25

under Rule 60 (b) will be set aside only on a clear showing of

an abuse of discretion." Murphy v. Administrator of the Div. of

Personnel Admin., 377 Mass. 217, 227 (1979).

b. Timing of motion. As a threshold matter, the

plaintiffs contend that the defendant's motion is untimely. The

plaintiffs note that both changed circumstances cited by

MassHealth -- the amendment to 42 C.F.R. § 424.44 and the First

Circuit's ruling -- occurred in 2011, seven years before

MassHealth sought modification of the judgment. The motion

judge observed that MassHealth "has offered no reason for having

waited seven plus years to bring the instant [m]otion," but did

not go so far as to conclude that the motion was untimely.

A motion under Mass. R. Civ. P. 60 (b) (4)-(6) must be made

"within a reasonable time," which is to be determined in light

of all of the circumstances of the case. Such determinations,

however, are "addressed solely to the judge's discretion."

Chavoor v. Lewis, 383 Mass. 801, 805 n.4 (1981). "In

determining whether a motion was filed within a reasonable time,

a judge may consider the reasons for delay; the ability of the

movant to learn of the grounds earlier; prejudice to the

parties, if any; and the important interest of finality." Owens

v. Mukendi, 448 Mass. 66, 74 (2006).

There is no set formula for determining what constitutes a

"reasonable time" for the purposes of Mass. R. Civ. P. 60 (b) 26

(4)-(6). It is indisputable that a significant period of time

elapsed between the First Circuit's ruling and the filing of the

Rule 60 motion in this case -- indeed a much longer span of time

than we have deemed unreasonable in other cases. See Owens, 448

Mass. at 76-77 and cases cited (delays of two or three years

found to be unreasonable). We consider this delay troubling to

say the least, particularly given that MassHealth's

justification for its failure to promptly seek modification of

the judgment is somewhat murky. At oral arguments, MassHealth

suggested that the passage of the Affordable Care Act in 2010

prompted a sea change in health care that required MassHealth to

focus on more fundamental Medicaid issues, such as changes to

eligibility requirements, and that this contributed to the

lengthy delay in addressing the reimbursement issue. We

understand that the delay also may be due in part to

MassHealth's concern that it would be asking this court to

reconsider one of its own decisions -- indeed a decision that

was unanimous, and in which the court summarily denied a

petition for reconsideration, even after further regulatory

guidance from CMS.

More importantly, however, we recognize that clear

resolution of this issue is critical, given the substantial

amount of public funds at stake and the need to avoid

conflicting interpretations by this court and the First Circuit 27

that would lead to confusion and administrative deadlock. Cf.

United States v. 119.67 Acres of Land, More or Less, Situated in

Plaquemines Parish, State of La., 663 F.2d 1328, 1331 (5th Cir.

1981) (motion filed under Fed. R. Civ. P. 60(b)(6) should not be

dismissed as untimely "[g]iven the significant governmental and

public rights involved in this controversy"). Moreover, the

risk of prejudice to the plaintiffs of delay is diminished by

the fact that MassHealth is only seeking a prospective

modification of the declaratory judgment. In light of the

important interests at stake, the need for clarity, and the

diminished risk of prejudice to the plaintiffs, we conclude that

the motion is not untimely in the highly unusual circumstances

of this case.

c. Existence of changed circumstances. The judge below

found that MassHealth had failed to demonstrate changed

circumstances warranting modification of the declaratory

judgment. The judge observed that the relevant statutory

provision at issue in Atlanticare I, 42 U.S.C.

§ 1396a(a)(25)(B), had not been amended since this court's

ruling. Additionally, the motion judge noted that this court

was at least aware of the possibility that MassHealth might be

unable to recover reimbursements directly from Medicare, but

issued the Atlanticare I decision nonetheless. Finally, the

motion judge concluded that the reference to provider-based 28

reimbursement in 42 C.F.R. § 424.44 was too vague to constitute

explicit recognition of a State Medicaid's agency ability to

pursue reimbursement from a provider where the third-party

insurer is Medicare.

To determine whether MassHealth has demonstrated a change

in circumstances warranting a modification of the declaratory

judgment, we first look to the circumstances as they existed at

the time of our ruling in Atlanticare I. As discussed, in

Atlanticare I, 439 Mass. at 11, this court rejected MassHealth's

argument that it was not possible to seek reimbursements

directly from Medicare. A number of reasons motivated this

conclusion. First, we observed that neither party had

identified a Federal regulation specifically applicable to

instances "in which Medicare has acknowledged a mistake in

denying liability for a claim or has agreed to pay a claim

retroactively." Id. Second, we identified two Federal cases,

New York State Dep't of Social Servs. v. Bowen, 846 F.2d 129 (2d

Cir. 1988), and Michigan Dep't of Social Servs. v. Shalala, 859

F. Supp. 1113 (W.D. Mich. 1994), that "rejected the rationale

underlying [MassHealth's] position." Atlanticare I, supra at

11-12. At the same time, MassHealth had "cited no case that

supports the proposition that it cannot pursue reimbursement

from Medicare in the circumstances of this case." Id. at 13.

Third, we stated that while the HCFA had issued a letter in 1991 29

reflecting a "general position" that State Medicaid agencies

could not recover from Medicare, we considered it "of no

consequence that HCFA has not yet adopted the reasoning of

another court to the contrary." Id. Fourth, we observed that

"nothing in the record . . . suggest[s] that [MassHealth] has

ever attempted to recover reimbursement from Medicare, or that

it has been rebuffed in any attempts to do so." Id. And

finally, both parties had conceded at oral arguments that "it

might be possible for [MassHealth] to recover from Medicare."

Id. at 11 n.14.

Although our reasoning was understandable at the time,

postjudgment legal developments have altered the basis for each

of the rationales cited. First, while the parties were unable

to identify a Federal regulation that specifically addressed

retroactive Medicare liability in the context of retroactive

dual eligibles, the amended version of 42 C.F.R. § 424.44 now

does so, albeit obliquely.11 While § 424.44 pertains to the

filing deadline for Medicare claims, rather than the ability to

pay out funds to State Medicaid agencies, it explicitly

11The oblique nature of the reference is unsurprising, given that Medicare, much like Medicaid, is an incredibly complicated statutory scheme. See Schweiker v. Gray Panthers, 453 U.S. 34, 43 (1981). The law that established both programs is known for its "Byzantine construction," id., which makes it "almost unintelligible to the uninitiated." Id., quoting Friedman v. Berger, 547 F.2d 724, 727 n.7 (2d Cir. 1976), cert. denied, 430 U.S. 984 (1977). 30

contemplates that State Medicaid agencies will seek

reimbursement from providers, and providers will seek payment

from Medicare. See Tarin v. Commissioner of the Div. of Med.

Assistance, 424 Mass. 743, 751 (1997) (Federal Medicaid

regulations entitled to substantial deference). CMS's Medicare

claims processing manual, dated January 21, 2011, similarly

makes reference to a State Medicaid agency "recoup[ing] the

money it paid the provider or supplier." The April 2003 letter

issued by CMS less than a month after our holding in Atlanticare

I further reiterates that neither the Federal statutory scheme

nor Federal regulations prohibit a State Medicaid agency from

recovering its payment directly from the provider where the

liable third party is Medicare. Even more explicit, however, is

CMS's December 2003 letter to MassHealth, which states that

"there is no statutory authority under Medicare to allow a

[S]tate to seek recovery and be paid directly from Medicare."

In such instances, CMS stated, "the [S]tate may timely request

the provider to submit a bill timely to Medicare." A June 2005

letter further confirmed that "there is no statutory authority

for reimbursing Medicaid directly for services rendered to

Medicare beneficiaries." Sebelius, 638 F.3d at 34.

As to the two cases we cited in support of MassHealth's

ability to directly seek reimbursement from Medicare, subsequent

developments in the case law constitute a clear change in 31

circumstances from Atlanticare I. In New York State Dep't of

Social Servs., 846 F.2d at 130, upon which this court relied in

Atlanticare I, the United States Court of Appeals for the Second

Circuit held that the State Medicaid agency had standing to

appeal from the denial of nursing home patients' Medicare

claims. We cited that case as suggestive of a State Medicaid

agency's authority to seek reimbursement directly from Medicare.

Atlanticare I, 439 Mass. at 11. More recently, however, in the

context of Medicare claims for home health care services, the

Second Circuit deferred to CMS's position that such claims must

be filed by providers, not Medicare beneficiaries or State

Medicaid agencies. Leavitt, 428 F.3d at 146. See also

Charlotte-Mecklenburg Hosp. Auth. v. North Carolina Dep't of

Health & Human Servs., 201 N.C. App. 70, 77 (2009) ("only

providers of services can submit Medicare reimbursement claims

on behalf of Medicaid recipients later determined to be eligible

for Medicare"). In so holding, the Second Circuit concluded

that State Medicaid agencies could obtain reimbursements from

providers using demand billing. See Leavitt, supra at 149.

Of course, the most obvious, significant change in the case

law since Atlanticare I is that the First Circuit has now

definitively stated that MassHealth may not seek reimbursement

directly from Medicare. Notably, although CMS's predecessor,

HCFA, was not a party to Atlanticare I and did not submit an 32

amicus brief to the court, CMS was a party to the First Circuit

litigation and was able to outline the agency's position

unequivocally. It is clear from the Sebelius litigation that

CMS takes the position that State Medicaid agencies may not

pursue reimbursement directly from Medicare.

Finally, the record before us is now clear that MassHealth

has attempted to recover from Medicare directly and has been

unable to do so. Initially, this was only because CMS took a

stance that Medicare could not pay out funds to MassHealth, but

CMS's view has now also been endorsed by the First Circuit. In

sum, post-Atlanticare I changes to the Federal law have made

clear what remained ambiguous at the time of our prior decision

-- that it is not possible for MassHealth to recover from

Medicare directly.

Despite these significant developments in the years since

Atlanticare I, the plaintiffs reiterate that the language of 42

U.S.C. § 1396a(a)(25)(B) has not changed, and the Federal

Medicaid regulations in place at the time were adequate to

indicate that direct recovery was not going to be possible. For

the reasons discussed supra, however, we consider the law to

have changed significantly, or at least to have been

significantly clarified, since our original decision.

The plaintiffs also rely on our previous discussion of the

cost-benefit analysis requirement in Atlanticare I, arguing that 33

this requirement would serve little purpose if State Medicaid

agencies were allowed to seek reimbursement from providers,

rather than from liable third parties. The statute premises

reimbursement on a finding that "the amount of reimbursement the

State can reasonably expect to recover exceeds the costs of such

recovery." 42 U.S.C. § 1396a(a)(25)(B). As we observed in

passing in Atlanticare I, if a State Medicaid agency is able to

seek reimbursement from a provider, "realistically, there are

few instances in which the cost of such recovery would exceed

the amount of the recovery." Atlanticare I, 439 Mass. at 7.

Thus, we reasoned, if Congress intended to allow State Medicaid

agencies to seek reimbursement from providers, this provision

would be rendered "largely superfluous," as the cost-benefit

analysis would reliably weigh in favor of seeking reimbursement.

Id.

Although the regulations are less than clear about which

party's costs need to be considered, we recognize that

MassHealth would be unlikely to consider reimbursement not cost

effective if it could simply shift the costs of recovery to the

providers. With that consideration in mind, however, and after

reviewing the regulations, we conclude that the costs to

providers may and should be given consideration.

The regulations indicate that seeking reimbursement is

considered cost effective where "the amount [the State Medicaid 34

agency] reasonably expects to recover will be greater than the

cost of recovery." 42 C.F.R. § 433.139(f)(1). The regulations

do not, however, define the scope of what fairly may be

considered in calculating the "cost of recovery." Further,

where a State requests a waiver of the sixty-day deadline for

seeking reimbursement due to lack of cost effectiveness, see

note 4, supra, the regulation explains that providing adequate

documentation of such would include "costs associated with

billing, claims recovery data, and a State analysis documenting

a cost-effective alternative." 42 C.F.R. § 433.139(e)(1)(ii).

Albeit that these examples are in reference to requesting a

waiver of the sixty-day deadline, we find these examples also to

be illustrative of the kinds of information that may be

considered in conducting a cost-benefit analysis for the purpose

of seeking reimbursement; and two of the three examples provided

easily could pertain to the costs associated with providers.

Thus, we conclude that when MassHealth seeks to recover payments

made to providers and require them to seek reimbursement from

Medicare, any associated costs to providers of doing so may be

properly considered.

That being said, this factor does not change our analysis

in this case. In the original administrative proceedings from

which this case originates, testimony was heard as to the nature

of the burden placed on providers who had been tasked with 35

chasing after third parties for payment. No evidence has been

included in the record presently before this court as to the

administrative cost that would be placed on providers of

pursuing Medicare, or the extent to which such costs would be

offset by the increased compensation rate from Medicare.

Moreover, it is unclear to what extent the costs of recovery may

be substantially alleviated by the use of computerized

recordkeeping and data storage, something that is much more

widespread now than at the time of our original decision.

In sum, given subsequent developments in the Federal law –-

primarily, the additional administrative guidance from CMS, the

First Circuit's ruling in Sebelius, and the amendments to 42

C.F.R. § 424.44 -- we conclude that it was an abuse of

discretion to find that MassHealth had failed to show a change

in circumstances since Atlanticare I. Medicaid is designed to

be a payer of last resort, and it would be "illogical to suggest

. . . that the statutory and regulatory scheme of Medicare

abrogates" this principle. New York Dep't of Social Servs., 846

F.2d at 134. Because MassHealth cannot recover reimbursements

directly from Medicare, the best way to harmonize these

statutory schemes is to conclude that while State Medicaid

agencies are generally expected to seek reimbursements directly

from liable third parties, the State agency may instead seek

reimbursement from the provider if the liable third party is 36

Medicare. Cf. Leavitt, 428 F.3d at 146 (deference to agency

interpretation particularly warranted where it provides

"reasonable resolution of an apparent conflict" between two

Federal regulations).

d. Modification of judgment. Separate and apart from the

issue of changed circumstances, the motion judge also concluded

that the agency's proposed modification of the judgment was not

"suitably tailored" to any such change in circumstances.12 The

judge observed that while MassHealth relied on Medicare-related

developments to justify its request for modification, MassHealth

nonetheless sought a wholesale reversal of Atlanticare I as it

pertained to all liable third parties.

We agree that MassHealth's proposed modification sweeps too

broadly. In its motion, MassHealth requests modification of the

judgment "so that MassHealth may resume enforcing a regulation

(now codified at 130 [Code Mass. Regs.] § 450.316(F)) in order

12The motion judge's reference to "suitable tailoring" derives from jurisprudence concerning the Federal analog to Mass. R. Civ. P. 60. See Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367, 391 (1992). The parties adopt this standard in their briefing as well. Under Fed. R. Civ. P. 60, once a moving party has satisfied its burden of demonstrating changed circumstances, the court must "determine whether the proposed modification is suitably tailored to the changed circumstance." Rufo, supra at 391. We have cited to Rufo in the context of discussing Mass. R. Civ. P. 60, but we have never explicitly adopted a "suitable tailoring" requirement. See MacDonald v. Caruso, 467 Mass. 382, 388 (2014). For the purposes of this decision, we assume, without deciding, that suitable tailoring is required under our rule as well. 37

to pursue reimbursement from a previously-paid provider when a

third party entity becomes retroactively liable." Yet

enforcement of the regulation as written would apply to all

post-payment third-party reimbursements, not just those sought

from Medicare. As discussed supra, the changed circumstances

that warrant a modification of the judgment pertain specifically

to retroactive Medicare liability, not all third-party

liability. MassHealth has further failed to provide a rationale

for modifying the judgment beyond its applicability to Medicare

reimbursements. Indeed, in its reply brief, MassHealth

indicates that this is a nonissue for other third parties

because MassHealth already has a direct right of recovery

against non-Medicare insurers under G. L. c. 118E, § 22, and

MassHealth has a general practice of seeking payment of

liabilities due to third-party insurance coverage directly from

the insurers themselves, rather than from providers.

To determine the appropriate scope of modification of the

judgment, we therefore examine the practical impact of the

changed circumstances on the administrability of the final

judgment. In the wake of the First Circuit's ruling, MassHealth

cannot recover reimbursements directly from Medicare for

services provided to retroactive dual eligibles. MassHealth

currently utilizes demand billing instead –- a process by which

MassHealth requests that the provider submit a bill to Medicare 38

MassHealth asserts that this solution does not permit MassHealth

to pursue reimbursements where retroactive Medicare eligibility

is discovered more than twelve months after the service was

performed, in light of Medicare's twelve-month filing deadline.

MassHealth notes that the Medicare filing deadline exception

outlined in 42 C.F.R. § 424.44(b)(3), which is designed to

address reimbursements to State Medicaid agencies, is contingent

upon the State first voiding the Medicaid payment.13

13Neither party addresses the Medicare filing deadline exception contained within 42 C.F.R. § 424.44(b)(2). This exception is not contingent upon the voiding of the Medicaid payment, unlike the exception provided by 42 C.F.R. § 424.44(b)(3), and triggers a six-month extension of the filing deadline from the date that the beneficiary or provider was notified of Medicare entitlement. Indeed, CMS explicitly declined to "create an additional exception [to the regulation] to permit providers and suppliers to submit claims for services at the request of a Medicaid State Agency prior to the State Medicaid Agency actually recovering the payment," because CMS believed the exception under 42 C.F.R. § 424.44(b)(2) was sufficient to account for such instances. 75 Fed. Reg. 73448- 73449 (Nov. 29, 2010). Title 42 C.F.R. § 424.44(b)(2) does not, however, provide as favorable of a filing deadline extension as 42 C.F.R. § 424.44(b)(3). This is because the six-month extension provided by 42 C.F.R. § 424.44(b)(2) commences as soon as the provider or beneficiary is notified of Medicare eligibility, while the six-month extension provided by 42 C.F.R. § 424.44(b)(3) does not commence until MassHealth recovers the payment.

We also note that neither party addressed the relevance of a Federal regulatory provision that appears to have contemplated that State Medicaid agencies would pursue a waiver of the sixty- day deadline for seeking reimbursement where the liable third party is Medicare: 39

We conclude that changed circumstances justify the

elimination of the restrictions imposed by Atlanticare I that

declared that MassHealth does not have the authority to require

that health care providers return payment to MassHealth in the

event that Medicare is later identified as a liable third party.

Those restrictions were imposed based on the incorrect

assumption that MassHealth could and should pursue reimbursement

directly from Medicare. Given that MassHealth cannot pursue

Medicare directly, and the permissible length of time for

seeking reimbursements may be conditioned on whether MassHealth

sought and received reimbursement from providers, see 42 C.F.R.

§ 433.139(d)(2), we conclude that it is appropriate to modify

the declaratory judgment to allow MassHealth to require

reimbursement from providers where a health care service was

rendered to an individual who retroactively became eligible for

Medicare.

As mentioned previously, the original declaratory judgment

entered in this case provided as follows:

"An agency requesting a waiver of the requirements specifically concerning either the [sixty]–day limit in paragraph (d)(1) or (d)(2) of this section must submit documentation of written agreement between the agency and the third party, including Medicare fiscal intermediaries and carriers, that extension of the billing requirement is agreeable to all parties."

42 C.F.R. § 433.139(e)(4). 40

"It is further DECLARED that [MassHealth] lacks the authority to implement 130 Code Mass. Regs. § 450.316(E) [now renumbered § 450.316(F)] to the extent that the regulation, by requiring hospitals to refund Medicaid payments to [MassHealth] after the hospitals have complied with [MassHealth]'s due diligence regulation (130 Code Mass. Regs. § 450.316) and received payment for their services from [MassHealth] and [MassHealth] subsequently learns that a third-party insurer (including Medicare) is responsible for payment for all or part of the hospital's services, is inconsistent with the Supreme Judicial Court's interpretation of 42 U.S.C. § 1396a(a)(25)(B)."

The declaratory judgment is to be modified so as to excise the

parenthetical "(including Medicare)" and to append the following

statement to the end of the declaration: "Notwithstanding the

above, MassHealth retains the authority to implement 130 Code

Mass. Regs. § 450.316(E) [now renumbered § 450.316(F)] if the

third-party insurer is identified as Medicare. In accordance

with § 450.316(F), MassHealth may require a provider to

reimburse MassHealth where a health care service was rendered to

an individual who later became retroactively eligible for

Medicare. The provider must then bill Medicare before

resubmitting a claim to MassHealth." This modification shall be

prospective only, applicable to reimbursements sought for

services performed subsequent to the date of this decision.

3. Conclusion. For the foregoing reasons, we conclude

that changed circumstances require modification of the

declaratory judgment entered pursuant to our holding in

Atlanticare I. Accordingly, we order that this case be remanded 41

to the Superior Court for modification of the judgment in

accordance with this opinion.

So ordered.