From Casetext: Smarter Legal Research

Reliable Home Health Care, Inc. v. Thompson

United States District Court, E.D. Louisiana
Jan 4, 2002
CIVIL ACTION NO: 01-2343 SECTION: "R"(2) (E.D. La. Jan. 4, 2002)

Summary

explaining that Medicare makes interim payments on an estimated basis and audits those payments at a later time for under — or overpayment

Summary of this case from In re Memorial Hospital, Roxborough

Opinion

CIVIL ACTION NO: 01-2343 SECTION: "R"(2)

January 4, 2002


ORDER AND REASONS


Plaintiff Reliable Home Health Care, Inc. brings suit against defendant, Tommy Thompson, in his capacity as the Secretary ("Secretary") of the United States Department of Health and Human Services ("HHS"), alleging that the Secretary's procedures for calculating overpayments and for determining eligibility for an extended repayment schedule violated due process under the Fifth Amendment of the United States Constitution. Along with its complaint, plaintiff filed a request for a temporary restraining order, which it immediately withdrew, and then a motion for preliminary injunction to stay defendant from withholding plaintiff's medicare payments. The Secretary moves the Court to dismiss this case for lack of subject matter jurisdiction. For the foregoing reasons, defendant's motion to dismiss is granted.

I. BACKGROUND

Plaintiff is a corporation providing home health care services in the New Orleans metropolitan area for Medicare beneficiaries. In 1998, Reliable participated as a health care provider in the federal Medicare program, as established by Title XVIII of the Social Security Act, 42 U.S.C. § 1395, et seq. Plaintiff entered into a provider agreement with Health Care Financing Administration ("HCFA"), a branch of HHS, by which plaintiff was to be reimbursed for the "reasonable cost" of covered services, in accordance with standards and limitations promulgated by the Secretary. 42 U.S.C. § 1395x(v)(1)(A)Z 1395f(b); 42 C.F.R. § 413. The day-to-day administration of the auditing and reimbursement activities was handled by Palmetto Government Benefits ("Palmetto"), a private fiscal intermediary.

This suit arises under Part A of the Medicare statute, which authorizes reimbursement for the "reasonable costs" of covered services provided by home health care agencies. Part A can further be divided into "coverage" and "reasonable cost" determinations. See Mount Sinai Hospital v. Weinberger, 517 F.2d 329, modified, 522 F.2d 179 (5th Cir. 1975), cert. denied, 425 U.S. 935, 96 S.Ct. 1665 (1976).

This case involves coverage determinations — decisions about whether specific items or services are' covered by Part A. The Medicare statute requires that reimbursements be made periodically, on an interim basis, before an audit is conducted to determine the precise amount of reimbursement due under the applicable law. Thus, Medicare makes initial payments on an estimated basis and audits the payments at a later time. 42 C.F.R. § 413.60, 413.64. The Medicare statute, however, requires that interim payments made to a provider be adjusted later to take into account any known overpayments or underpayments. 42 U.S.C. § 1395g(a). At the end of the fiscal year, the provider must file a "cost report" of its actual "reasonable cost," and the intermediary performs a full audit and issues a Notice of Program Reimbursement ("NPR"), which constitutes the intermediary's final determination of the total reasonable costs payable for the year with any overpayment or underpayment. As part of its review, the intermediary uses a sampling method to evaluate the extent of overpayments. See Chaves Country Home Health Service v. Sullivan, 931 F.2d 914, 915-16 (D.C. Cir. 1991) (describing the sampling method promulgated by HCFA Ruling 86-1, Use of Statistical Sampling to Project Overpayments to Medicare Providers and Suppliers (Feb. 20, 1986), which is used by intermediaries to calculate overpayments)

If the intermediary determines that an overpayment has been made, the provider may request reconsideration by the fiscal intermediary. 42 C.F.R. § 405.710. The provider can challenge the statistical validity of both the sample set and the extrapolation. An unappealed determination is binding unless grounds exist for reopening and revision. The provider may then seek an evidentiary hearing before an administrative law judge ("ALJ") on the Health and Human Services Department Appeals Board ("Appeals Board"). The ALJ's decision becomes the Secretary's final decision for purposes of judicial review unless that decision is later reviewed by the Appellate Division of the Appeals Board. The provider may seek judicial review in federal district court only after it has exhausted all of these administrative remedies. 42 U.S.C. § 405 (g).

In March 1998, Palmetto placed Reliable on a pre-payment medical review, which revealed that of 62 claims it reviewed, 31 were denied for reasons such as lack of medical necessity and failure to obtain a physician's certification. Palmetto then placed Reliable on a post-payment medical review. Of the 298 claims it reviewed, 189 were partially denied for failure to meet applicable Medicare standards. From these findings, Palmetto determined that Reliable had been overpaid by an amount of $419,710.15 in fiscal year 1998.

Palmetto informed Reliable that it would withhold pending Medicare reimbursements until the overpayments were recouped. On February 1, 2000, Palmetto notified Reliable that it had the right to appeal the specific claim denials to an ALJ. Reliable appealed 60 claims, contesting: (1) the small number of claims chosen for review, (2) the double jeopardy nature of the postpayment audit, (3) the flawed nature of the postpayment audit. As of now, the ALJ has dismissed forty of those appeals for failure to seek reconsideration and has found in favor of Reliable on sixteen claims. Four claims remain pending. The overpayment has been reduced from $419,710.15 to $369,852.85.

On February 14, 2000, Reliable requested that Palmetto place it on an extended repayment schedule, and it began to pay the overpayment in monthly increments. On February 15, 2001, Palmetto notified Reliable that its request for an extended payment schedule had been denied because Palmetto determined that Reliable did not have an adequate cash flow. (Mot. to Dismiss, Ex. 2, Decl. Virginia Jordan.) Defendant points out that plaintiff was given the opportunity to submit documentation establishing a capital infusion plan that would provide the necessary independent source of funds to support an extended repayment plan. ( Id.) Plaintiff did not submit any such documentation. ( Id.) In a letter, Palmetto also informed Reliable that its decision was not an "initial determination" under 42 C.F.R. § 405.704, 401.625, 405.375(c), and was therefore, unappealable. As a consequence, on March 2, 2001, Palmetto placed Reliable on recoupment for recovery of an overpayment. Reliable currently owes $135,000.

On July, 2001, plaintiff filed a complaint, alleging that defendant's procedure of determining overpayments violated the Fifth Amendment and that defendant's refusal to allow plaintiff to enter into an extended repayment plan was arbitrary and capricious. In particular, plaintiff asserts that defendant's method of calculating overpayments using sample claims that had been subject to both a comprehensive pre- and postpayment audit was unconstitutional.

The Secretary moves to dismiss based on lack of jurisdiction for plaintiff's failure to exhaust administrative remedies. The Secretary also asserts that denial of an extended repayment program is non-justiciable.

II. DISCUSSION

A. Subject Matter Jurisdiction

The crux of the Secretary's argument is that since Reliable has not received a final decision from the Secretary on the overpayment issue, Reliable is jurisdictionally barred from filing suit in federal court.

Title 42 U.S.C. § 405 (g) is the sole avenue for judicial review of all claims arising under the Medicare Act. See Heckler v. Ringer, 466 U.S. 602, 605, 104 S.Ct. 2013, 2016-17 (1984) It provides:

Any individual, after any final decision of the Secretary made after a hearing to which he was a party, irrespective of the amount in controversy, may obtain a review of such decision.

The "final decision" of the Secretary consists of two elements: (1) the "jurisdictional" non-waivable requirement of presentment of the claim for benefits to the Secretary; and (2) the "waivable" requirement of exhaustion of administrative remedies (exhaustion). Mathews v. Eldridge, 424 U.S. 319, 328, 96 S.Ct. 893, 899 (1976)

Defendant does not dispute that the first prong of Eldridge has been satisfied. The Secretary, however, does not waive the exhaustion requirement. Plaintiff nonetheless urges the Court to judicially waive exhaustion as the Supreme Court did in Mathews. Id. at 330, 96 S.Ct. at 900 ("But cases may arise where a claimant's interest in having a particular issue resolved promptly is so great that deference to the agency's judgment is inappropriate.").

Under Mathews, the claimant must satisfy a three-part test in order for the court to find that exhaustion is not necessary. The claim at issue must be (1) collateral to a substantive claim of entitlement, (2) colorable in its showing that refusal of the relief sought will cause an injury which retroactive payments cannot remedy, and (3) one whose resolution would not serve the purposes of exhaustion (futility). Id. at 330-32, 96 S.Ct. at 900-01.

1. Collateral to substantive claim

In Mathews, the Supreme Court held that the plaintiff's claim that a pre-deprivation hearing was constitutionally required was "entirely collateral" to his substantive claim of entitlement. 424 U.S. at 330-32, 96 S.Ct. at 900-01 (1976). There, the individual's constitutional claim regarding his procedural rights involved an analysis of the Supreme Court's jurisprudence on the Due Process Clause, which involved completely separate issues from his challenge to the Secretary's decision to terminate benefits.

In this case, although Reliable has characterized its challenge as a due process claim, it does not fall into the "entirely collateral" exception. The Supreme Court has found that the constitutional tenor of a claim is not a determinative factor in deciding whether a claim is collateral. Rather, the exhaustion requirement is applicable to a constitutionally-based claim when that claim is "inextricably intertwined" with a substantive claim of administrative entitlement. Heckler v. Ringer, 466 U.S. 602, 614, 104 S.Ct. 2013, 2021 (1984).

Reliable's claim, that inclusion of samples that had been subjected to both pre- and postpayment review to calculate overpayments is unconstitutional, is a direct challenge to the Secretary's substantive determination that overpayments were in fact made. A favorable resolution of this claim would result in a cessation of the recoupment process. At its core, therefore, plaintiff's "constitutional claim" is a request that this Court recalculate the overpayments, which is an administrative inquiry.

The Fifth Circuit has found that when a court is required to make such an administrative inquiry in order to adjudicate a claim, that claim is not "entirely collateral" to the substantive issue. See Affiliated professional Home Health Care Agency v. Shalala, 164 F.3d 282, 285-86 (5th Cir. 1999) (per curiam). In Affiliated professional Home Health Care, the Fifth Circuit found that an African-American owned health care provider's claim that the Secretary violated its equal protection rights by arbitrarily enforcing certain Medicare regulations against it was not collateral to its claim for administrative entitlement. Id. Although it acknowledged that plaintiff's claim was constitutional in nature, the court found it significant that the court would "necessarily have to immerse itself in [Medicare] regulations and make a factual determination as to whether APRO was actually in compliance." Id. Because the court would have to make an inquiry of an "administrative nature," the court found that "it cannot be reasonably concluded that APRO's claim is collateral to a claim for administrative entitlement."

Here, in order to determine the validity of the sample set of claims used to calculate Reliable's overpayment, the Court first would have to make a predicate determination as to whether those claims were covered by the Medicare provisions. Such a determination is administrative in nature. Accordingly, since plaintiff's claim is not collateral to its substantive claim, the Court finds that exhaustion is required here under the Mathews v. Eldridge test.

The Court does not reach the merits of prongs two and three of the Mathews test. See Affiliated professional Home Health Care Agency, 164 F.3d at 285-86 (finding the Mathews test was not satisfied when the "collateral" test was not met and not discussing the "colorable" or the "futility" prongs).

2. irreparable Harm

The Fifth Circuit suggested in Affiliated professional Home Health Care Agency that a finding of irreparable harm alone could justify judicial waiver of exhaustion. 164 F.3d at 286 ("A more difficult issue, however, is whether the facts of this case give rise to a sufficient threat of irreparable harm so as to justify waiver of the administrative exhaustion requirement.").

Reliable has not shown that such threat exists here. Reliable asserts that the Secretary's actions have been economically crippling and that it will be forced to go out of business. (Mot. Prelim. Inj., at 15-16.) Economic harm alone is insufficient to constitute irreparable harm. There is no evidence that Reliable's patients will be deprived of necessary services if the Reliable is forced out of business. See Affiliated professional Home Health Care Agency, 164 F.3d at 286. The Secretary presents evidence that there are 26 home health agencies in New Orleans that are currently certified as providers in the Medicare program. (Mot. to Dismiss, Ex. 3, Decl. Jann Caldwell.) Accordingly, the Court finds that the argued threat of irreparable harm is insufficient to warrant judicial waiver.

B. Extended Repayment Plan

The Secretary argues that the decision to offer or deny a request for an extended repayment plan is a question of debt collection, falling within the discretionary authority of the Secretary and therefore nonjusticiable. Plaintiff argues that the Secretary implicitly approved its request for an extended repayment plan when it allowed plaintiff to make monthly payments for nearly year before it issued a decision denying the request. Plaintiff contends that the later denial was arbitrary, capricious and an abuse of discretion. See U.S.C. § 706(2)(A).

In reviewing an agency's decision under the APA, the Court cannot set aside that decision unless it is arbitrary, capricious, an abuse of discretion, or otherwise contrary to law. 5 U.S.C. § 706 (2)(A). To make this finding, the Court "must consider whether the decision was based on a consideration of relevant factors and whether there has been a clear error of judgment." Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814 (1971). The Court may not substitute its judgment for that of the agency, and it must uphold a decision that is reasonable and conforms to minimal standards of rationality.

There is an exception to reviewability, however, when "statutes preclude judicial review" or "agency action is committed to agency discretion by law." 5 U.S.C. § 701(a)(1) and (2). The Supreme Court in Heckler v. Chaney explained the difference between these two grounds:

The former applies when Congress has expressed an intent to preclude judicial review. The latter applies in different circumstances; even where Congress has not affirmatively precluded review, review is not to be had if the statute is drawn so that a court would have no meaningful standard against which to judge the agency's exercise of discretion. In such a case, the statute ("law") can be taken to have "committed" the decisionmaking to the agency's judgment absolutely.
470 U.S. 821, 830, 105 S.Ct. 1649, 1655 (1985). See Federal Deposit Insurance Corp. v. Bank of Coushatta, 930 F.2d 1122, 1127-28 (5th Cir. 1991) (adopting the standard established by Heckler).

Under 45 C.F.R. § 30.19, the Secretary has the authority to enter into an extended repayment plan:

The Secretary may enter into a written agreement with a debtor for payment of a debt in regular installments if payment in one lump sum, either by cash or offset, will cause the debtor extreme financial hardship. The debtor must submit sufficient information to determine his or her ability to pay. . . . The Secretary will consider factors such as the amount of the debt, the length of the proposed repayment period, whether the debtor is willing to sign a confess-judgment note or give collateral, past dealings with the debtor and documentation indicating that the offset will cause the debtor extreme financial hardship and that the debtor will be financially incapable of adhering to the terms of the agreement.

(Emphasis added).

Neither 42 C.F.R. § 401.607 (d) nor 45 C.F.R. § 30.19 explicitly prohibits judicial review, which is necessary to find that a statute precludes review. In the absence of an express prohibition, there is a "strong presumption that Congress did not mean to prohibit all judicial review of [the] decision." See Coushatta, 930 F.2d at 1128 (quoting Dunlap v. Bachowski, 421 U.S. 560, 567, 95 S.Ct. 1851, 1857 (1975)).

To decide whether review is precluded because the issue is committed to agency discretion, the Court must determine whether the Secretary's decision is an action "committed to agency discretion by law." 5 U.S.C. § 701(a)(2). In Citizens to Preserve Overton Park, the Supreme Court, analyzing the legislative history of the APA, held that section 701(a)(2) applied "in those rare instances where `statutes are drawn in such broad terms that in a given case there is no law to apply'" 401 U.S. at 410, 91 S.Ct. at 821 (quoting S. Rep. No. 752, 79th Cong., 1st Sess., 26 (1945)). The Supreme Court in Heckler v. Chaney, 470 U.S. 821, 105 S.Ct. 1649 (1985), stated that even absent explicit congressional language precluding review, "review is not to be had if the statute is drawn so that a court would have no meaningful standard against which to judge the agency's exercise of discretion." Id. at 830, 105 S.Ct. at 1655. See also Christopher Village Ltd. P'ship v. Retsinas, 190 F.3d 310, 315 (5th Cir. 1999) (citing Heckler v. Chaney, 470 U.S. at 830, 105 S.Ct. at 1655 (1985)).

In Webster v. Doe, the Supreme Court found that a decision to discharge an employee of the Central Intelligence Agency was committed to agency discretion by the language and structure of section 102(c) of the National Security Act. 486 U.S. 592, 600, 108 S.Ct. 2047, 2052 (1988). The statute provided that the CIA was allowed to terminate an employee whenever the Director of the Agency "`shall deem such termination necessary or advisable in the interests of the United States' . . ., not simply when the dismissal is necessary or advisable to those interests." Webster, 486 U.S. at 600, 108 S.Ct. at 2052 (quoting section 102(c) of NSA). The Court concluded that "[t]his standard fairly exudes deference to the Director, and appears to us to foreclose the application of any meaningful judicial standard of review. Id.

In Perales v. Casillas, 903 F.2d 1043, 1048 (5th Cir. 1990), the Fifth Circuit similarly found that the INS's decision whether to grant an alien the option of a prehearing voluntary departure was committed to agency discretion. The regulation, 8 U.S.C. § 1252 (b), provides in pertinent part:

In the discretion of the Attorney General and under such regulations as he may prescribe, deportation proceedings, including issuance of a warrant of arrest, and a finding of deportability under this section need not be required in the case of any alien who admits to belonging to a class of aliens who are deportable under section 1251 of this title if such alien voluntarily departs from the United States at his own expense, or is removed at Government expense as hereinafter authorized, unless the Attorney General has reason to believe that such alien is deportable under paragraphs (4) to (7), (11), (12), (14) to (17), (18), or (19) of section 1251(a) of this title . . .

The Court found that the statutory language was permissive, rather than mandatory. Id. at 1048. Further, the Court noted that "[p]re-hearing voluntary departure for visa applicants is permissive relief from deportation created by regulation." Id.

Like the statutes in Webster and Perales, the language of the statute authorizing the Secretary to enter into repayment plans also "fairly exudes deference." Webster, 486 U.S. at 600, 108 S.Ct. at 2052. 45 C.F.R. § 30.19 states broadly that the agency "may enter" into such an extended repayment plan. The statute does not provide any standards for determining whether or when an extended repayment plan is mandated. An extended payment plan is not required under any specific circumstances. Indeed, allowing debtors like Reliable to enter into an extended repayment plan is "permissive relief" from the general rule of having to repay the overpayments in a lump sum. Perales, 903 F.2d at 1048. The statute's broad delegation to the Secretary to decide whether to enter into a repayment plan gives this Court no standard to use in evaluating the decision. See, e.g., Brazos Elec. Power Coop., Inc. v. Southwestern Power Admin., 819 F.2d 537, 543-44 (5th Cir. 1987) (holding that action of federal agency in allocating hydroelectric power was not justiciable because the statutory language requiring the agency to "transmit and dispose of such power and energy in such manner as to encourage the most widespread use thereof" did not provide a meaningful standard by which to judge the propriety of the agency's actions). Based on the statutory language and the permissive nature of the regulation, the Court finds that the Secretary's action is committed to agency discretion. See, e.g., Helping Hands Professional Home Health Services, Inc. v. Shalala, 1997 WU 778990, *6 (S.D. Cal. 1997) (finding nothing in the statute or regulations requiring Secretary "to even entertain a request for an extended payment plan, much less to agree to a plan of a particular length or to state reasons for denying a request for a plan."); In re The Southern Institute for Treatment and Evaluation, Inc., 217 B.R. 962, 964 (S.D. Fl. 1998) (finding that HHS' consideration, and ultimate rejection, of a debtor's proposed extended cash repayment plan was purely a matter within HHS' administrative discretion).

Further, this is not a case where the Secretary refused to consider a request for an extended repayment schedule. In fact, in exercising its discretion, the Secretary considered the factors in the statute and found Reliable wanting. Specifically, the record reflects that the Secretary allowed plaintiff to submit documentation in support of its request, found that plaintiff was operating at a loss, and invited plaintiff to submit a capital infusion plan, which plaintiff failed to do, before it denied plaintiff's request. (Mot. to Dismiss, Ex. 2, Decl. Jordan, at 2.)

To the extent that plaintiff pled equitable estoppel, the Court finds that argument to be meritless. First, equitable estoppel is not traditionally available against the government. See Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 383, 68 S.Ct. 1, 3 (1947); Schweiker v. Hanson, 450 U.S. 785, 788-89, 101. S.Ct. 1468, 1471 (1981) (per curiam) (finding that equitable estoppel did not apply against the Secretary when an employee of the SSA erroneously informed claimant that she was not eligible for benefits). Further, there is no evidence that the Secretary misled Reliable into erroneously believing that its request for an extended repayment program had been granted when the Secretary accepted Reliable's payments according to a proposed repayment schedule while Reliable's request was under consideration. It is clear from the Secretary's correspondence to Reliable that making monthly payments while Reliable's request was being considered did not entitle Reliable to an extended payment plan. (Mot. to Dismiss, Ex. 5, at 1.) On January 29, 2001, Palmetto sent a letter to Reliable informing it that its extended repayment schedule request had been received, but that it was missing necessary documentation. In that letter, Palmetto clearly stated that Reliable was required to submit a first payment according to the proposed repayment schedule, and that Reliable was required to continue making payments while its request was-under consideration. ( Id., at 3.) ("Payments must continue to be made pending written approval/denial of the request. Failure to continue to make proposed payments could result in the denial of the request.").

III. CONCLUSION

For the foregoing reasons, the Court dismisses plaintiff's suit for lack of subject matter jurisdiction.


Summaries of

Reliable Home Health Care, Inc. v. Thompson

United States District Court, E.D. Louisiana
Jan 4, 2002
CIVIL ACTION NO: 01-2343 SECTION: "R"(2) (E.D. La. Jan. 4, 2002)

explaining that Medicare makes interim payments on an estimated basis and audits those payments at a later time for under — or overpayment

Summary of this case from In re Memorial Hospital, Roxborough
Case details for

Reliable Home Health Care, Inc. v. Thompson

Case Details

Full title:RELIABLE HOME HEALTH CARE, INC. v. TOMMY THOMPSON, SECRETARY, DEPARTMENT…

Court:United States District Court, E.D. Louisiana

Date published: Jan 4, 2002

Citations

CIVIL ACTION NO: 01-2343 SECTION: "R"(2) (E.D. La. Jan. 4, 2002)

Citing Cases

In re Memorial Hospital, Roxborough

Furthermore, RHC also represented in paragraph 4.13 that its "[l]iability for amounts due to Medicare…

Chamberlain v. Barnhart

Mathews v. Eldridge, 424 U.S. 319, 328, 96 S.Ct. 893, 899, 47 L.Ed.2d 18 (1976) (construing Weinberger v.…