Health Law Daily No judicial review of NCD where only amount of reimbursement at issue
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Thursday, February 11, 2021

No judicial review of NCD where only amount of reimbursement at issue

By Jeffrey H. Brochin, J.D.

ALJ’s erroneous dismissal of NCD reimbursement amount appeal was not an "initial determination" subject to judicial review, and therefore court was without subject matter jurisdiction to review patient’s claim.

A federal district court in the District of Columbia has granted the motion to dismiss filed by HHS in a lawsuit challenging a Medicare contractor’s decision to reimburse a patient’s enteral nutrition therapy cartridges in an amount below the supplier’s acquisition cost. The manufacturer of the cartridges did not have standing to sue for judicial review because they were not the beneficiary, and the patient’s claim was dismissed because a national coverage determination (NCD) does not include a determination with respect to the amount of payment under the NCD (Henry v. Azar, February 8, 2021, Kollar-Kotelly, C.).

Patient’s claim for reimbursement. Relizorb is a small enzyme-embedded cartridge that connects between a feeding pump and a patient who relies on an enteral feeding pump tubing set-up because of severe fat malabsorption resulting from pancreatic insufficiency. The drug and cartridge mimic normal pancreatic function by breaking down fats in formula used for enteral tube feeding. In 2019 the patient was prescribed 60 such cartridges by his physician, and his supplier submitted a claim to the Medicare contractor for $9,898.20, i.e., a cost of $164.97 per cartridge. However, the contractor only reimbursed the amount of $2,025.07 based on a rate of $33.75 per cartridge.

Gap-filling reimbursement. In 2015 the FDA cleared Relizorb for prescription use, after which the manufacturer applied to CMS for a unique billing code for the device which CMS issued in December 2018. However, because it was a newly-coded product that was not yet on Medicare’s national fee schedule for enteral nutrition therapy, CMS directed Medicare contractors to determine reimbursement payments "in accordance with the gap-filling methodology in section 60.3 of Chapter 23 of the Medicare Claims Processing Manual."

Administrative appeals. The patient requested a redetermination from the Medicare contractor, arguing that the contractor’s payment determination for Relizorb rested on an erroneous application of the Medicare gap-filling methodology; however, the contractor upheld its original payment determination. The patient then requested that a qualified independent contractor (QIC) reconsider the payment determination for Relizorb made by the first-level Medicare contractor, but the QIC dismissed his claim, concluding that the first-level contractor’s payment determination for Relizorb was not an initial determination under the Medicare Act and, therefore, could not be appealed. He subsequently requested that an ALJ within HHS review the QIC’s dismissal. The ALJ dismissed his request to review the QIC’s dismissal order, also concluding that the contractor’s payment determination was not an initial determination.

Alleged NCD amendment. The patient and manufacturer asserted four claims in an effort to invalidate the Medicare contractor’s payment determination, including that the Medicare contractor’s payment determination was arbitrary and capricious because it started from an unreasonable assessment of reasonable charges and approached gap-filling payments for Relizorb differently than for other products; and, that the contractor’s underpayment for Relizorb constituted an amendment to a preexisting NCD, which requires Medicare coverage for enteral nutrition therapy, and that this functional NCD amendment was invalid.

Extremely limited federal jurisdiction. The court noted that federal jurisdiction is extremely limited for claims arising under the Medicare Act, and that 42 U.S.C. § 1395ii divests the district courts of federal question jurisdiction on any claim arising under the Medicare Act, except as provided in 42 U.S.C. § 405(g) which, in pertinent part, permits any person to file a civil action for judicial review, after any final decision of HHS made after a hearing to which he was a party. Therefore, in practice the statute demands the channeling of virtually all legal attacks through the agency. There are, however, narrow exceptions to these channeling and exhaustion requirements, it is those exceptions that the plaintiffs relied upon in their jurisdictional arguments.

Low-reimbursement challenge. The Medicare Act defines an NCD as ‘" determination by HHS with respect to whether or not a particular item or service is covered nationally." Proceeding from that definition, the court found that although the patient was indeed a Medicare beneficiary and, therefore had standing to challenge an NCD, he unfortunately had not challenged an NCD—meaning a determination with respect to whether or not a particular item or service is covered nationally by Medicare—but rather the amount of the reimbursement determined. He argued that the Medicare contractor’s underpayment for his Relizorb cartridges effectively amended the existing NCD coverage for Relizorb.

The court found that although his argument was novel and had some merit, it ran counter to the plain language of the Medicare Act, which, in defining an NCD, expressly stated that an NCD "does not include a determination with respect to the amount of payment made for a particular item or service so covered." Addressing another obstacle to the patient’s suit, the court noted that HHS itself had found the ALJ’s decision to have been erroneous—yet, no motion for vacatur was filed by the patient—further rendering the ALJ’s decision without the status of an initial determination subject to judicial review.

The court concluded that the challenge was in fact not over an NCD, and therefore, the claim did not fall within an exception to the jurisdictional limitations of the Medicare Act. Accordingly, the court granted HHS’ motion to dismiss for lack of subject-matter jurisdiction.

The case is No. 1:20-cv-01144-CKK.

Attorneys: Stephanie Ann Webster (Ropes & Gray LLP) for James Henry and Alcresta Therapeutics, Inc. Johnny Hillary Walker, III, U.S. Attorney's Office for the District of Columbia, for Alex M. Azar, II.

Companies: Alcresta Therapeutics, Inc.

MainStory: TopStory CaseDecisions CMSNews BillingNews CoverageNews DrugBiologicNews ExclusionsNews MedicareContractorNews DistrictofColumbiaNews

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