Health Law Daily Providers have no property interest in overpayments from CMS
Monday, November 5, 2018

Providers have no property interest in overpayments from CMS

By Rebecca Mayo, J.D.

A healthcare provider does not have a protectable property interest in overpayments it received from CMS sufficient to support a claim for injunctive relief to stop recoupment. A district court held that a healthcare provider failed to demonstrate a due process violation when CMS initiated recoupment before an administrative law judge (ALJ) had a chance to review and issue a decision. As such, a temporary restraining order was improper (PHHC, LLC v. Azar, November 2, 2018, Boyko, C.).

Overpayment. PHHC, LLC is a Medicare-certified home health agency that provides skilled nursing and home health care to patients in Ohio. An audit by CMS revealed that PHHC failed to meet face-to-face assessment requirements, billed for unnecessary skilled nursing and physical therapy visits, had invalid case plans, and failed to meet certification and recertification requirements, which resulted in over billing and overpayments totaling $59,640.99 in 2016 and $10,754,349 in 2017.

PHHC received unfavorable decisions at the redetermination and reconsideration levels of appeal and timely submitted a request for an ALJ hearing. The Medicare contractor began recoupment proceedings 11 days later. PHHC moved for injunctive relief in the form of a court order preventing the contractor from seeking further recoupment until the ALJ has rendered its decision. PHHC claimed that it will be forced to close its business because it will no longer be able to serve its patients when over 77.6 percent of its revenue is derived from Medicare services.

Exhaustion. The court’s authority to review agency action is limited to review after the administrative process has been exhausted. However, the court may hear a claim that is entirely collateral to a substantive challenge to the agency action. The court here found that PHHC asked the court to review its due process rights and did not assert claims for full payment under the Medicare Act and therefore the claim fell under the collateral exception to exhaustion.

Protectable interest. In order to establish a substantive due process claim, a plaintiff must have a protectable property interest in a benefit. The court looked to the Medicare statute and determined that the statute does not provide a provider with an unfettered right to payment, but rather the payments are subject to adjustments by the Secretary and subject to the provider supplying information required by the Secretary in order to determine the amount of payments even for a prior payment. Therefore, PHHC’s interest in the overpayments does not rise to the level of a constitutionally protected property interest.

The court also noted that the statute does not guarantee an ALJ hearing prior to recoupment, nor does it guarantee a hearing with an ALJ within the 90 period. In fact the statute provides deadlines and consequences for missing deadlines, which contemplates that a decision may not be rendered within the time frame under the statute. Further, PHHC was not denied payment for services rendered, but rather PHHC had already been paid and CMS fulfilled its obligations to PHHC. As such, there was no property interest in the overpayments.

Harm. The court found that there are procedures in place prior to recoupment that provide for review by different individuals and an opportunity to provide evidence and expert testimony and these procedures present a low risk of erroneous deprivation. The court also noted that in 2017 statistics showed ALJ appellants were successful on only 25.9 percent of appeals and only 18.2 percent thus far in 2018. The court found that this demonstrated that there was a small risk of erroneous deprivation from a delay in an ALJ hearing because statistically the government was more likely to prevail at the appellate level.

Further, the resources of the Medicare program were limited and if the court were to enjoin recoupment while PHHC continues to receive payments until the ALJ considered the issue, PHHC could incur even more overpayments that it would admittedly not be able to return. PHHC knew the risks of participating in a federally sponsored program; therefore, the court found the public interest in recoupment outweighed the risk of irreparable harm to PHHC and denied the temporary restraining order.

The case is No. 1:18CV1824.

Attorneys: Amanda L. Waesch (Brennan, Manna & Diamond) for PHHC, LLC d/b/a Personal Home Health Care. Lisa Hammond Johnson, Office of the U.S. Attorney, for Secretary of the United States Department of Health and Human Services, Administrator for the Centers for Medicare and Medicaid Services and Palmetto GBA, LLC.

Companies: PHHC, LLC d/b/a Personal Home Health Care; Secretary of the United States Department of Health and Human Services; Administrator for the Centers for Medicare and Medicaid Services; Palmetto GBA, LLC

MainStory: TopStory CaseDecisions CMSNews AuditNews BillingNews HomeNews PaymentNews ProgramIntegrityNews ProviderNews OhioNews

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