Health Law Daily Court finds some jurisdiction over challenge to recoupment before exhaustion
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Thursday, January 14, 2016

Court finds some jurisdiction over challenge to recoupment before exhaustion

By Kayla R. Bryant, J.D.

A court cannot issue an injunction requiring CMS to stop holding funds owed to an independent medical laboratory while the issue of possible overpayments is held up in administrative review. The U.S. District Court for the Western District of Louisiana held that it did not have subject matter jurisdiction over that part of the case, but that it does have jurisdiction over a procedural due process claim. However, D&G Holdings, LLC’s complaint failed to identify a non-discretionary duty owed to it by HHS, and the complaint must be amended to allow the court to offer relief (D&G Holdings v. Burwell, January 12, 2016, Foote, E.).

Overpayments. A zone program integrity contractor (ZPIC) reviewed D&G Holdings’ facility between 2011 and 2014. Following the review, it alleged that D&G Holdings failed to prorate mileage appropriately and that Medicare had overpaid the company approximately $8.3 million. A Louisiana Medicare administrative contractor (MAC) is handling the attempted recovery of the alleged overpayment.

Medicare regulations provide that a MAC may recoup alleged overpayments by holding later payments the provider is due (42 C.F.R. sec. 405.371(a)(3)). Although providers may petition CMS or the MAC to delay recoupment, regulations require the provider to endure the entire administrative process before appealing the decision (42 C.F.R. sec. 405.375(c)). Although D&G Holdings is waiting on a hearing before an administrative law judge (ALJ) in the middle of the appeals process, it filed this action in district court, as a hearing may be delayed for over two years due to significant administrative backlog (see The current state of the Medicare appeals backlog: experts smell a RAC, August 6, 2015). D&G Holdings alleges the recoupment will deprive the company of 95 percent of total revenue.

Jurisdiction. D&G Holdings argued that the district court had jurisdiction on various grounds: (1) that bringing a claim through administrative proceedings would essentially be “no review at all,” and that the court can invoke 28 U.S.C. §1331 to review; (2) that the All Writs Act (28 U.S.C. §1651) allows the court to issue a writ in aid of jurisdiction; (3) that 5 U.S.C. §705 of the Administrative Procedure Act (APA) allows the court to issue an injunction to preserve the status quo during the administrative proceedings; (4) that 28 U.S.C. §1361 allows the court to compel a U.S. agency to perform a duty owed to a party; and (5) that 42 U.S.C. §405(g) provides subject matter jurisdiction for injunctive relief.

The court rejected the first three grounds outright, stating that D&G Holdings’ arguments were contrary to previous court opinions and that the statutes did not provide subject matter jurisdiction in this situation. Although §1361 does grant the court jurisdiction to compel agency action if D&G Holdings shows that HHS owes a nondiscretionary duty through a writ of mandamus, it does not allow the court to enjoin the agency to prevent recoupment.

Section 405(g). D&G Holdings argued that this provision of the Social Security Act mandating the exhaustion requirement allows the court to require HHS to provide an ALJ hearing within 90 days of October 14, 2015. Previous court decisions have established that exhaustion can be waived when a party asserts a collateral claim and makes a showing of irreparable harm. The court found that the procedural due process claim is collateral to a claim of Medicare payment and that being forced out of business would be evidence of irreparable injury.

Under the procedural due process claim, D&G Holdings asked the court to issue an injunction preventing HHS from engaging in what it claims is an ultra vires action, or an act where the agency is exceeding its power. Although the court deemed that it has subject matter jurisdiction over such an action, it stated that the claim is “no more than bare bones” and required D&G Holdings to amend the complaint. The court dismissed the claim for writ of mandamus after stating that D&G Holdings did not clearly state a claim for a duty owed by HHS, but without prejudice.

The case is Civil Action No. 15-2624.

Attorneys: Bobby Joseph Delise (Delise and Hall Law Firm) for D & G Holdings LLC t/a Doctors Lab. Joseph P. Landreneau, U.S. Attorney’s Office, for Sylvia Mathews Burwell, Secretary, U.S. Department of Health and Human Services.

Companies: D & G Holdings LLC t/a Doctors Lab; U.S. Department of Health and Human Services

MainStory: TopStory CaseDecisions CMSNews AuditNews ClaimsAppealsNews LaboratoryNews MedicareContractorNews PaymentNews ZPICNews LouisianaNews

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