Opinion
Civ. No. H-95-2241.
June 1999.
MEMORANDUM AND ORDER
Pending before the Court in this False Claims Act ("FCA") case is defendants' renewed motion for mandamus relief. Pursuant to 42 C.F.R. § 405.371, et seq., Medicare payments to a number of the defendants have been suspended on the ground that the Health Care Financing Administration (the "HCFA") and certain Medicare carriers (the "carriers") possess reliable information of the existence of overpayments, fraud and willful misrepresentation. In the pending motion, defendants contend that the Department of Justice (the "Justice Department") has improperly prevented them from seeking rescission of these suspensions by pursuing the administrative appeals authorized by applicable regulations. Invoking this Court's mandamus jurisdiction under 28 U.S.C. § 1361, defendants ask this Court to enter an Order requiring the HCFA and the Medicare carriers to take certain actions which will permit defendants' administrative appeals to go forward.
A previous motion seeking mandamus relief was filed by defendants at an earlier stage of this case but was summarily denied by Judge Young on January 20, 1999. Because the motion had never been fully briefed by the parties, the undersigned permitted defendants to file a renewed motion.
Defendants rely on 28 U.S.C. § 1331 as an alternative ground for the subject matter jurisdiction of this Court.
Extensive memoranda and numerous exhibits have been filed by the parties in support of and in opposition to defendants' pending motion for mandamus relief. A hearing on the motion has been held in open court. For the reasons stated herein, defendants' renewed motion for mandamus relief will be granted in part and denied in part.
I Administrative Procedures Relating to Suspensions
The HCFA and the various carriers which administer the Medicare program have the authority, pursuant to 42 C.F.R. § 405.371, et seq . , to suspend Medicare Part B payments in order to protect the Medicare Trust Fund. Suspensions may be imposed without prior notice where fraud or misrepresentation is suspected. § 405.372(a)(4). Under the suspensions, a provider is not excluded or suspended from participation in the Medicare program entirely, but payments to it are placed in suspense accounts pending final resolution of the government's claims of overpayment.
After a suspension is imposed without prior notice, a provider has the right to submit a rebuttal statement explaining "why the suspension should be removed." § 405.372(b)(2). If a provider does so, then the HCFA or carrier must make a determination within 15 days as to whether the suspension is justified and must notify the provider of the result. § 405.375(a)-(b). This preliminary determination is not deemed to be an "initial determination" under the regulations and is not appealable. § 405.375(c).
A suspension may continue for 180 days, but may be extended by an additional 180 days at a carrier's request if it is unable to complete its investigation. § 405.372(d). HCFA must notify the provider of a requested extension. § 405.372(d)(2)(ii). These time limits do not apply "if the case has been referred to, and is being considered by, the OIG [Office of the Inspector General] for administrative action . . ." § 405.372(d)(3)(i). Alternatively, the HCFA may grant an extension beyond one year "if the Department of Justice submits a written request to HCFA that the suspension of payment be continued based on the ongoing investigation and anticipated filing of criminal and/or civil actions." § 405.372(d)(3)(ii).
Defendants' pending motion is based primarily on the provisions of § 405.372(c), entitled "Subsequent action," which requires the HCFA or the carrier to obtain needed additional information in order to be able, after the suspension is in effect, "to make a determination as to whether an overpayment exists or the payments may be made." The regulations do not specify any particular time for an overpayment determination to be made, but do require that the HCFA or carrier "take timely action" to obtain additional information and "make all reasonable efforts to expedite the [overpayment] determination." Id .
The overpayment determination is critical because Medicare patients or providers can pursue their administrative appeals only after an overpayment determination has been made. See 42 C.F.R. § 405.801. After an overpayment determination has been made, a provider may request a review of that determination. § 405.807. If, following the review, the decision is adverse, the provider may then request a hearing before an independent officer appointed by the carrier. § 405.815-.835. If dissatisfied with the independent hearing officer's determination, the provider may request a hearing before an Administrative Law Judge ("ALJ"). § 405.855. The provider may then appeal an unfavorable decision of the ALJ to the Department Appeals Board (the "DAB"). The administrative review process is informal and non-adversarial. See 20 C.F.R. § 404.900(b). Neither the carrier nor the HCFA is represented. The carrier merely submits to the hearing officer documentation explaining its reasons for the suspension.
While the preliminary suspension determination is not appealable under § 405.375(c), an overpayment determination constitutes a carrier's "initial determination" (denial of payment) subject to review under § 405.801(a). See 42 C.F.R. § 405.803(b) and 20 C.F.R. § 404.902(k) (defining "initial determination").
After exhausting these administrative procedures, the provider may then seek judicial review of an adverse decision. 42 U.S.C. § 405(g) (as incorporated by 42 U.S.C. § 1395ff(b)). Under this statutory provision, the Secretary of Health and Human Services files a certified record in support of her decision which the court must sustain if supported by substantial evidence. Id .
II Background Facts
Pursuant to § 405.371, the HCFA has suspended Medicare payments to some 23 of the parties named as defendants in this case. These suspensions were implemented on behalf of the HCFA by various Medicare carriers. All suspensions were imposed pursuant to § 405.372(a)(4) without prior notice to the defendant entities because of suspected fraud or misrepresentation. In each instance, the providers submitted a rebuttal statement pursuant to § 405.372(b)(2), and the carrier thereafter made a determination that the suspension was proper. However, since no overpayment determinations have been made by the HCFA and the carriers, there has been no subsequent administrative action as allowed by § 405.372(c) and other applicable regulations.
On September 24, 1997, Xact Medicare Services ("Xact"), the Medicare carrier with jurisdiction over a number of cancer treatment centers in Pennsylvania, New Jersey and Maryland, notified 15 defendants that it was immediately suspending further Medicare payments because of alleged misrepresentations concerning the inpatient status of Medicare beneficiaries. This suspension was lifted in November of 1997 when Xact and 14 centers entered into an Interim Funding Agreement. Under this agreement, Xact retained $809,091.01 in suspended payments, and the centers agreed to provide a financial guarantee bond in the amount of $350,000 to protect Xact and the Medicare Program from further losses.
This entity was doing business at the time of the suspensions under the name of Xact. Although its name has now been changed to Highmark, Inc., it will be referred to herein as Xact.
On October 8, 1998, Xact notified the same 14 providers of a suspension based on allegedly fraudulent claims for services not performed. Pursuant to § 405.372(d)(2)(ii), this suspension was extended for a 180-day period from April 6, 1999 and remains in effect today.
On December 18, 1998, TrailBlazers Health Enterprises, Inc. ("TrailBlazers") suspended Medicare payments to certain Maryland centers because of allegedly fraudulent claims made for services not performed. These suspensions also presently remain in effect.
Cigna Healthcare Medicare Administration ("CIGNA") suspended Medicare payments to certain defendant centers in North Carolina on March 16, 1999. CIGNA sent a follow-up letter to the centers on April 13, 1999 detailing specific examples of wrongful billing practices including billing for special treatments and the submission of duplicate claims. These suspensions also remain in effect today.
Defendant providers have not been able to pursue administrative appeals of their suspensions because the HCFA and the aforesaid carriers have not to date made the overpayment determinations required by § 405.372(c). Attorneys of the Justice Department have advised the HCFA of the pendency in this Court of this FCA suit and have requested that the HCFA not render overpayment determinations since this Court now has jurisdiction to address the issue of whether false claims for payment were knowingly made. According to the Justice Department, the limited administrative process provided by § 405.301, et seq ., "is not adequate to ensure that an informed decision is reached." The carriers have complied with the Justice Department's requests and have suspended the appeals process for the alleged overpayments which are the subject of this FCA case.
The carriers have stayed the appeals process for all suspensions involving defendant EquiMed and other Colkitt-related entities.
III Applicable Principles of Law
A federal district court is given jurisdiction over a mandamus action by 28 U.S.C. § 1361, which provides as follows:The district courts shall have original jurisdiction of any action in the nature of mandamus to compel an officer or employee of the United States or any agency thereof to perform a duty owed to the plaintiff.
The government contends that, with certain exceptions not applicable in this case, federal subject matter jurisdiction over claims arising under the Medicare Act is barred by 42 U.S.C. § 405(g) and (h). Section 405(g) establishes procedures and remedies for judicial review of administrative determinations involving Medicare claims. Section 405(h) provides as follows:
(h) Finality of Secretary's decision
The findings and decision of the Secretary after a hearing shall be binding upon all individuals who were parties to such a hearing. No findings of fact or decision of the Secretary shall be reviewed by any person, tribunal, or governmental agency except as herein provided. No action against the United States, the Secretary, or any officer or employee thereof shall be brought under section 1331 or 1346 of Title 28 to recover on any claim arising under this subchapter.The issuance of a writ of mandamus under § 1361 is an extraordinary remedy available to compel officers or employees of the United States to perform a nondiscretionary legal duty. See Your Home Visiting Nurse Services, Inc. v. Shalala , 119 S.Ct. 930, 935 (1999) (the duty owed plaintiff must be nondiscretionary). The writ will issue only if the party seeking issuance of the writ proves three elements: "(1) the petitioner has shown a clear right to the relief sought; (2) the respondent has a clear duty to do the particular act requested by the petitioner; and (3) no other adequate remedy is available." In re First Fed. Sav. Loan Ass'n , 860 F.2d 135, 138 (4th Cir. 1988). "In other words, the petitioner must demonstrate that his right to the issuance of the writ is `clear and indisputable.'" Michael v. Lullo , 1999 WL 181571, *9 (4th Cir.) (quoting Allied Chemical Corp. v. Daiflon, Inc . , 449 U.S. 33, 35 (1980)).
IV The Parties' Contentions
Defendants argue that the carriers have a clear legal duty to expeditiously render overpayment determinations in order to allow the defendant providers to pursue administrative appeals. Defendants contend that the carriers' refusal to make these overpayment determinations subjects them to irreparable harm by denying them recourse to the available administrative procedures mandated by law.
Invoking this Court's mandamus jurisdiction, defendants ask that an order be entered requiring that wide-ranging actions be taken by the government and its agents, including the HCFA, Medicare carriers Xact, TrailBlazer, CIGNA and the Department of Justice. They ask this Court to order:
1. That Xact/HCFA, issue the in-patient overpayment determination or release to the appropriate defendants the sum of $809,091.91;
2. That Xact/HCFA, lift the October 8, 1998 suspensions or issue a final determination with respect to the October 8, 1998 suspensions;
3. That Trailblazer/HCFA lift the December 18, 1998 suspensions or issue a final determination with respect to the December 18, 1998 suspensions;
4. That CIGNA/HCFA lift the March 16, 1999 suspensions or issue a final determination with respect to the March 16, 1999 suspensions;
5. That the Department of Justice immediately cease all interference in administrative proceedings involving defendants, including the administrative process as it relates to any defendant's Medicare claims and payments, and including the issuance by the Department of Justice of directives or requests to administrative agencies which pertain to defendants;
6. That the Department of Justice immediately cease all interference in all Freedom of Information Act requests or proceedings involving defendants, including the issuance of directives or requests to administrative agencies which pertain to defendants;
7. That the Department of Justice immediately cease all interference in any audits by Medicare carriers which involve defendants, including the issuance of directives or requests to administrative agencies which pertain to defendants; and
8. That the Government promptly comply with all federal rules and regulations relating to Medicare Part B payments, overpayment determinations, and payment suspensions.In opposing the pending motion, the government argues that this Court lacks subject matter jurisdiction because § 405(g) of the Social Security Act (incorporated into the Medicare Act by 42 U.S.C. § 1395ff) precludes a federal court from granting mandamus relief in a case involving Medicare claims. The government further argues that defendants have failed to demonstrate the prerequisites for any judicially-recognized exception to the general exhaustion of remedies requirement imposed by § 405(h).
In their reply memorandum, defendants have slightly modified their requests for relief. The listing herein is taken from that reply memorandum.
According to the government, its broad-based statutory authority to pursue claims of fraud and misrepresentation in a FCA suit authorizes it to instruct the HCFA and defendants' carriers to suspend the administrative process in order that the Justice Department may address false claims issues solely within this judicial forum. The government further argues that the non-adversarial nature of the administrative appeals process is inadequate to address claims involving fraud and misrepresentation. Finally, the government contends that even if jurisdiction is proper, defendants have failed to meet the requirements for the issuance of mandamus relief, (1) because defendants have not identified a clear, nondiscretionary duty owed to them by the HCFA and the carriers, and (2) because their right to relief is not clear and indisputable, inasmuch as they have an adequate forum in this Court to litigate the false claims issues.
V Discussion (a) Mandamus Jurisdiction
After due consideration of the parties' contentions and the applicable authorities, the Court concludes that the Medicare Act does not preclude the exercise by this Court of federal mandamus jurisdiction in this case. Neither § 405(g) nor § 405(h) of Title 42 bars this Court's mandamus review of the failure of the HCFA and the carriers to perform a duty mandated by the applicable regulations. It is specious for the government to argue that, unless the defendants have exhausted the administrative remedies provided by the statute and the regulations, § 405(h) imposes an absolute bar to this Court's exercise of subject matter jurisdiction over issues arising under the Social Security Act. It is the government's action in refusing to make overpayment determinations which has prevented the defendants from exhausting their administrative remedies. By its very terms, § 405(h) precludes a court's exercise of jurisdiction over only "action[s] . . . brought under § 1331 or 1346 of Title 28 to recover on any claim arising under this subchapter." Thus, a mandamus action brought under § 1361 is not barred by the express terms of § 405(h).
The government's reliance on Weinberger v. Salfi , 422 U.S. 749, 757 (1975), and Heckler v. Ringer , 466 U.S. 602, 624 (1984), is misplaced. Contrary to the government's contentions, the Supreme Court has not held that a claim arising under the Medicare Act may not be reviewed in a mandamus action. Very recently, the Supreme Court explicitly so stated in Your Home Visiting Nurse Services, Inc. v. Shalala , 119 S.Ct. 930, 935 n. 3 (1999):
The Secretary urges us to hold that mandamus is altogether unavailable to review claims arising under the Medicare Act, in light of the second sentence of 42 U.S.C. § 405(h), which provides that "[n]o findings of fact or decision of the [Secretary] shall be reviewed by any person, tribunal, or governmental agency except as" provided in the Medicare Act itself. We have avoided deciding this issue in the past, see , e.g . , Heckler v. Ringer , 466 U.S. 602, 616-17, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984), and we again find it unnecessary to reach it today.In Dietsch v. Schweiker , 700 F.2d 865, 868 (2d Cir. 1983), the Second Circuit held that mandamus jurisdiction was available in a case brought under the Social Security Act by a claimant who had been denied disability benefits. The Court determined that the plaintiff's challenge in that case was a procedural one in that the plaintiff was seeking to compel the Appeals Council to perform its duty with respect to plaintiff's timely request for review under applicable regulations. Id . Concluding that the case fell squarely within prior Second Circuit decisions, the Court held that the district court had mandamus jurisdiction under § 1361 to consider plaintiff's procedural challenge. Id . Similarly, in Weiss v. Department of Health and Human Services , 859 F. Supp. 58, 62 (E.D.N.Y. 1994), the Court held that mandamus jurisdiction could properly be invoked in a case where the plaintiffs sought to compel the Secretary of Health and Human Services to perform his duty to reconsider an initial determination upon a timely reconsideration request. Id . The Court held that plaintiff could proceed under § 1361 inasmuch as his challenge was a procedural one and he had no other avenue for relief. Id . See also Anderson v. Sullivan , 959 F.2d 690, 693 (8th Cir. 1992) ("[T]he Social Security Act does not preclude mandamus jurisdiction over procedural matters . . .").
As in the cases cited above, defendants are here asking that this Court, in the exercise of its mandamus jurisdiction, require the HCFA and the carriers to perform a duty mandated by applicable regulations. The challenge relates to a procedural matter, and defendants have no other avenue whereby they might secure the relief they are seeking. This Court accordingly concludes that it has jurisdiction under § 1361 to consider whether defendants are entitled to mandamus relief.
Since this Court has determined that mandamus jurisdiction exists under § 1361, it is not necessary to address defendants' alternative argument that jurisdiction also exists under § 1331.
(b) Defendants' Right to Relief
It is quite apparent that defendants are not entitled to a substantial part of the relief requested in their motion. Under the applicable regulations, this Court is not authorized at this stage of the proceedings to lift the October 8, 1998 suspensions, to lift the December 18, 1998 suspensions or to lift the March 16, 1999 suspensions. The merits of defendants' contention that the suspensions now in effect should be rescinded must first be addressed in administrative proceedings.Other generalized relief sought by defendants in their motion is much too broadly defined to be considered here under this Court's mandamus jurisdiction. Defendants have not on this record met their burden of showing that the HCFA and Xact have breached the Interim Funding Agreement of November 19, 1997 and that they are therefore entitled to an order requiring the issuance of an overpayment determination relating to the $809,091.91 retained by Xact. Furthermore, defendants have not demonstrated that the Department of Justice has a clear, nondiscretionary duty to cease interference in administrative proceedings involving defendants, to cease interference in defendants' Freedom of Information Act requests or to cease interference in audits by Medicare carriers which involve defendants. Nor have defendants here shown that this Court should order that the government should promptly comply with Medicare Part B rules and regulations. In order for mandamus to issue, the duty in question must involve "a specific, ministerial act devoid of the exercise of judgment or discretion." Dunn-McCampbell Royalty Interest, Inc. v. National Park Service , 112 F.3d 1283, 1288 (5th Cir. 1997).
However, as a part of the relief sought in their motion, defendants have also asked this Court to enter an Order requiring the HCFA and the carriers to make overpayment determinations with respect to the suspensions now in effect. On the record here, this Court has concluded that defendants are entitled to the entry of such an Order. Applicable regulations permit a provider to challenge suspensions in administrative proceedings. Pursuant to § 405.372(c), the HCFA and the carriers have a clear legal duty to make overpayment determinations. The duty is specific and nondiscretionary. Until overpayment determinations are made, a provider may not resort to the next step in the administrative process. Thus, defendants have here shown that there exists a clear governmental duty and that they have a clear right to this particular relief. See First Fed . , 860 F.2d at 138. Since no other avenue for relief is available, defendants are entitled to the entry of an Order requiring the HCFA and the carriers to perform the procedural duty imposed upon them by the applicable regulations.
The parties dispute at some length whether defendants have shown that they will suffer irreparable harm if the relief requested is not granted and whether they have established that they are likely to prevail in their attempts to have the suspensions at issue lifted. But defendants in the pending motion are not seeking a preliminary injunction. Since it involved a request for injunctive relief, the principles of Ram v. Heckler , 792 F.2d 444 (4th Cir. 1986) are not applicable to the pending motion which seeks relief under § 1361. Moreover, to prevail here, defendants are not required to show that their due process rights have been infringed. Mandamus relief is available in this case because defendants have shown that they have a clear right to the relief sought and that the HCFA and the carriers have a clear duty to make the overpayment determinations in question. See First Fed ., 860 F.2d at 138 .
Even though defendants need not show that they have been irreparably harmed by the refusal of the HCFA and the carriers to make the required overpayment determinations, there is little doubt that the suspensions have had a substantial adverse effect on their business operations. According to Dr. Colkitt, Medicare payments to defendants comprise 40% of the defendants' business. To date, payments aggregating more than $2.2 million have been suspended by the HCFA and the carriers.
The government argues that defendants are not at this time entitled to overpayment determinations because the regulations do not set any particular time limit for the HCFA and the carriers to make the necessary calculations. According to the government, the making of the overpayment determinations in question may be indefinitely delayed for more than a year during the pendency of this case. This Court must disagree. The HCFA and the carriers are required by § 405.372(c) to take "timely action" to obtain additional information after suspensions have been imposed in order to be able to make the necessary overpayment determinations. They are further required to make "all reasonable efforts to expedite the [overpayment] determination." Id . The suspensions in question have been in effect for many months, and the government has had ample time to complete the necessary calculations which would permit them to make the necessary overpayment determinations. Since the HCFA and the carries have not acted timely and expeditiously, the Court will order that they issue the necessary overpayment determinations within 20 days.
Even the most recent suspension, imposed on March 16, 1999, has been in effect for some three months.
According to the government, the administrative procedures which permit a provider to challenge suspensions of Medicare payments are not applicable when there is pending in a federal court a FCA suit like this one based on allegations of overpayments because of fraud and misrepresentation. But applicable Medicare regulations do not recognize any such exception to the administrative procedures mandated by § 405.372. Nor is there any language in the False Claims Act itself supporting the position taken by the government in this case. See 31 U.S.C. § 3729, et seq . Under the circumstances here, there is no reason why parallel administrative and judicial proceedings cannot go forward at the same time.
The government complains that the procedures mandated by § 405.371, et seq ., are informal and non-adversarial and contends that the HCFA and the carriers will be prejudiced because the administrative process does not ensure that "informed" decisions will be reached. By advancing such a contention, the government is doing no more than expressing its disagreement with the administrative procedures mandated by the regulations. The applicable regulations clearly do not permit participation by the government in the administrative process. If the Justice Department believes that the administrative appeals process is flawed, it should undertake efforts to amend the regulations rather than acting to thwart defendants' right to seek administrative review of the suspensions. Even if administrative determinations adverse to the government's position are reached, such determinations would not be conclusive in this FCA action. As the government has correctly noted, administrative findings have no collateral estoppel or res judicata effect in a civil action like this one. If the HCFA and the carriers are directed by an administrative order to rescind one or more of the suspensions in effect, the government would be entitled to seek appropriate relief in this Court challenging any such rescission.
There is no merit to the government's contention that the Justice Department has not instructed the HCFA and the carriers to stay administrative proceedings as to all of the suspensions imposed. Whether or not expressly so stated, the letter of Marlene F. Gibbons, Esq. dated August 4, 1998 and the letter of Michael F. Hertz dated November 16, 1998 have by implication instructed the HCFA and the carriers that, because of the pendency of this FCA suit, they should not issue overpayment determinations in any instances in which payments have been suspended because of the alleged submission of knowingly false claims.
VI Conclusion
For all the reasons stated, this Court has concluded that it has mandamus jurisdiction under 28 U.S.C. § 1361 to consider defendants' pending motion and that defendants are entitled to a part of the relief which they have requested. Defendants are entitled to the entry of an order directing the HCFA and the carriers to promptly make overpayment determinations mandated by § 405.372(c) so that defendants may go forward with the administrative process to which they are entitled under the applicable regulations. Other relief sought by defendants will be denied.
Accordingly, it is this ______ day of June, 1999 by the United States District Court for the District of Maryland,
ORDERED:
1. That defendants' renewed motion for mandamus relief is hereby granted in part and denied in part;
2. That defendants' requests for relief designated as Items 1, 5, 6, 7 and 8 are hereby denied;
3. That defendants' requests in Items 2, 3 and 4 that the October 8, 1998, the December 18, 1998 and the March 16, 1999 suspensions be lifted are hereby denied;
4. That defendants' requests in Items 2, 3 and 4 that the HCFA and the carriers issue overpayment determinations with respect to the October 8, 1998, the December 18, 1998 and the March 16, 1999 suspensions are hereby granted; and
5. That the HCFA and the carriers are hereby directed to make said overpayment determinations within 20 days from the date of this Order.