By Rebecca Mayo, J.D.
An appeals court reversed a lower court ruling that held there was no subject matter jurisdiction over a home health care provider’s request for a temporary restraining order (TRO) and injunction to prevent Medicare from recouping alleged overpayment before the administrative appeals processes concluded. The lower court ruled that because the appeals process had not been exhausted, there was no subject matter jurisdiction. However, the Court of Appeals held that exhaustion requirement could be waived since the claims were collateral and thus the court had jurisdiction (Family Rehabilitation, Inc. v. Azar, March 27, 2018, Smith, J.).
Background. In order to be reimbursed by Medicare for home health care services, a provider is required to perform an initial certification for each patient in conformity with various regulatory requirements. An audit was conducted on 43 reimbursement payments made to home health care services provider in Texas and it was determined that the provider had overbilled Medicare on 93 percent of the claims, primarily as a result of documentary deficiencies related to the initial home health certification. Based on this finding, it was determined that the provider had received $7,885,803.23 in excess reimbursements. The Medicare Administrative Contractor (MAC) sent a demand to the provider for that amount and the provider appealed.
Appeals. The provider challenged the initial audit results and the extrapolation methodology used to determine the amount of excess reimbursements by seeking redetermination from the MAC. The provider then requested reconsideration from a Qualified Independent Contractor (QIC), who adjusted the liability down to $7,622,122,31. The MAC informed the provider that it intended to begin recoupment and the provider requested a hearing in front of an Administrative Law Judge (ALJ). However, because of the backlog of Medicare appeals, the provider would be unable to obtain an ALJ hearing for at least another three to five years. If the provider could complete administrative review though escalation, it would still take 270 days from the date of the request for a hearing.
The provider alleges that it will be forced to shut down from insufficient revenues before its appeal is concluded because of the recoupment and sued for a TRO and an injunction to prevent the MAC from recouping the overpayments until its administrative appeal is concluded. The provider asserts that the situation violates its right to procedural due process, infringes its substantive due-process rights, establishes an ultra vires cause of action, and entitles it to a "preservation of rights" injunction under the Administrative Procedure Act. A district court held that it lacked subject matter jurisdiction because the provider had not exhausted administrative remedies and the provider appealed.
Collateral claim exception. A court may waive the exhaustion requirement and determine finality has occurred when a plaintiff asserts a collateral challenge that cannot be remedied after the exhaustion of administrative review. If the court must examine the merits of the underlying dispute or make independent judgments about eligibility under a statute, the claim is not collateral. In this case, the provider seeks only the suspension of recoupment before a hearing, which the court found was plainly collateral to the result of that hearing. The court also found that the combined threats of going out of business and the disruption to Medicare patients are sufficient irreparable injury to give the court jurisdiction over the procedural due-process and ultra vires claims. The court reversed and remanded the lower court decision as to those claims and affirmed the other decisions.
The case is No. 17-11337.
Attorneys: Thomas F. Allen, Jr. (Jones Day) for Family Rehabilitation, Inc. d/b/a Family Care Texas d/b/a Angels Care Home Health. Brian Walters Stoltz, U.S. Attorney's Office, for Alex M. Azar, II.
Companies: Family Rehabilitation, Inc. d/b/a Family Care Texas d/b/a Angels Care Home Health
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