Accident, Injury & Rehab., PC v. Azar

• Decision Date: 21 August 2018
• Docket Number: C/A No. 4:18-cv-02173-DCC
• Citation: 336 F.Supp.3d 599
• Court: U.S. District Court — District of South Carolina
• Parties: ACCIDENT, INJURY AND REHABILITATION, PC, d/b/a Advantage Health and Wellness, Plaintiff, v. Alex M. AZAR, II, Secretary of the United States Department of Health and Human Services; and Seema Verma, Administrator for the Centers for Medicare and Medicaid Services, Defendants.

336 F.Supp.3d 599

ACCIDENT, INJURY AND REHABILITATION, PC, d/b/a Advantage Health and Wellness, Plaintiff,

v.Alex M. AZAR, II, Secretary of the United States Department of Health and Human Services; and Seema Verma, Administrator for the Centers for Medicare and Medicaid Services, Defendants.

C/A No. 4:18-cv-02173-DCC

United States District Court, D. South Carolina, Florence Division.

Signed August 21, 2018

Cheryl D. Shoun, R. Bruce Wallace, Nexsen Pruet, Charleston, SC, for Plaintiff.

Barbara Murcier Bowens, Beth Drake, US Attorneys Office, Columbia, SC, for Defendants.

OPINION AND ORDER

Donald C. Coggins, Jr., United States District Judge

This matter comes before the Court on Plaintiff's Motion for Temporary Restraining Order and Preliminary Injunction. ECF No. 5. On August 8, 2018, the Court directed Plaintiff to serve Defendants with the Complaint and Motion. ECF No. 8. On August 13, 2018, the Court held a telephonic status conference with the parties to discuss the pending Motion. ECF No. 14. During the conference, the Court ordered the parties to consult within ten days to discuss the possibility of settlement negotiations and directed the parties to file a joint status conference at the conclusion of the ten-day period. Id. On August 20, 2018, the parties filed a Joint Status Report indicating "the Parties have agreed to engage in direct settlement negotiations and, if necessary, mediation through a third party neutral." ECF No. 19. Plaintiff has requested the issuance of a Temporary Restraining Order ("TRO") during that process.

BACKGROUND

I. Overview of Medicare Appeals System

In 1965, Congress enacted Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq. , known as the Medicare Program. Entitlement to Medicare is based on age (65 or older), disability, or affliction with end-stage renal disease. 42 U.S.C. §§ 426, 426-1. Medicare is comprised of Parts A, B, C, and D. Part B is medical insurance that authorizes payment of federal funds for health services, including physician, laboratory, outpatient, diagnostic, and radiology services. See 42 U.S.C. § 1395k ; 42 C.F.R. § 410.10.

The Secretary of Health and Human Services ("HHS") has overall responsibility for the administration of Medicare. Within HHS, the responsibility for the administration of Medicare has been delegated to the Centers for Medicare & Medicaid Services ("CMS"). To assist in the administration of Medicare Part B, CMS initially contracted with carriers or fiscal intermediaries. Carriers, typically private insurance companies, were largely responsible for processing and paying Part B claims. 42 C.F.R. §§ 421.1 – 421.3.

Beginning in November 2006, Medicare Administrative Contractors ("MACs") began replacing carriers and fiscal intermediaries. See 42 U.S.C. § 1395kk-1 ; 42 C.F.R. § 421.400 et seq. ; 71 F.R. 67960-01, at 68181 (Nov. 24, 2006). MACs generally act on behalf of CMS to process and pay Part B claims and perform administrative functions on a regional level. Since at least 2006, Palmetto GBA served as the Medicare carrier and fiscal intermediary for South Carolina until May 2010, when Palmetto GBA was awarded a contract to serve as South Carolina's MAC for Part B claims.

Medicare only covers medically necessary items or services, excluding from coverage "any expenses incurred for items or services [...] which [...] are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member." 42 U.S.C. § 1395y(a)(1)(A). After a hospital or healthcare provider performs Medicare-eligible services, it submits a claim for reimbursement to the MAC, which makes a determination of the medical necessity of the claim.

If the MAC denies a claim, a provider can engage in a four-level administrative appeal process, followed by judicial review. Am. Hosp. Assoc. v. Burwell , 812 F.3d 183, 185 (D.C. Cir. 2016). First, the provider presents its claim to the MAC for a "redetermination." Id. (citing 42 U.S.C. § 1395ff(a)(3)(A), (a)(3)(C)(ii) ). If the MAC denies the "redetermination," the provider can seek "reconsideration" by a Qualified Independent Contractor ("QIC"). 42 U.S.C. § 1395ff(c). Both of these review processes are overseen by CMS. Burwell , 812 F.3d at 185. "If the provider remains unsatisfied, and if its claim exceeds $150, it may continue to the third stage: de novo review by an administrative law judge, including a hearing." Id. (citations omitted). "This stage of the process is overseen by the Office of Medicare Hearings and Appeals ["OMHA"], which houses ALJs and their support staff, and which is funded by a separate appropriation." Id. at 185–86 (citations omitted). The final administrative appeal stage involves de novo review by the Medicare Appeals Council, which is a division of the Departmental Appeals Board ("DAB"). Id. at 186. "Although the DAB has authority to hold a hearing, it does so only if there is an extraordinary question of law/policy/fact." Id. (quotation omitted). Only after a party exhausts these administrative appeals may it seek judicial review in federal court.

In order to streamline the appeals process, there are statutory time frames for each step of the process. Redetermination by the MACs shall be conducted within sixty days. 42 U.S.C. § 1395ff(a)(3)(C)(ii). QICs shall conduct and decide reconsiderations within sixty days. Id. § 1395ff(c)(3)(C)(i). ALJs "shall conduct and conclude a hearing ... and render a decision within ninety days," though the appealing provider may waive this deadline. Id. § 1395ff(d)(1)(A), (B). Finally, the DAB must make a decision or remand the case to the ALJ for reconsideration within ninety days. Id. § 1395ff(d)(2)(A). If these time periods are complied with, appeals will proceed through the administrative process within approximately a year. The statutory scheme does, however, prescribe consequences for failure to meet several of the deadlines. "In a process commonly referred to as escalation, a provider that has been waiting for longer than the statutory time limit may advance its appeal to the next stage." Burwell , 812 F.3d at 186 (internal quotation marks omitted).

"For years, the administrative appeal process functioned largely as anticipated, with its various stages typically completed within the statutory time frames." Id. (citing Am. Hosp. Ass'n v. Burwell , 76 F.Supp.3d 43, 46 (D.D.C. 2014) ). Then, in 2010, the Secretary of HHS implemented the Medicare Recovery Audit Program, which is designed "for the purpose of identifying underpayments and overpayments and recouping overpayments." 42 U.S.C. § 1395ddd(h)(1). In order to accomplish this task, the Secretary of HHS entered into contracts with Recovery Audit Contractors ("RACs"), who are paid on a contingency basis for collecting overpayments. Burwell , 812 F.3d at 186. Additionally, CMS uses Zone Program Integrity Contractors ("ZPICs") to review post-payment claims. San Bois Health Servs., Inc. v. Hargan , No. CIV-14-560-RAW, 2017 WL 5140519, at *1 (E.D. Okla. Nov. 6, 2017). ZPICs frequently use statistical sampling in order to determine the total amount of a provider's overpayments that must be recouped. Id. The Recovery Audit program has been quite successful in recouping overpayments. Burwell , 812 F.3d at 187. "But because RAC denials are appealable through the same administrative process as initial denials, the RAC program has contributed to a drastic increase in the number of administrative appeals." Id. "Between RAC and non-RAC appeals, OMHA currently receives many more cases than it can process in a timely fashion." Id.

The backlogged administrative appeals process provides a number of inherent problems for medical providers. But during the first two levels of the appeals process, the status quo remains and the Government cannot begin recouping the money that it is allegedly owed for overpayments. Once a medical provider requests a hearing before the ALJ, however, the Government has the discretionary authority to recoup the alleged overpayments while the appeal is pending, often for several years before the provider is even afforded a hearing. 42 U.S.C. § 1395ddd(f)(2). It is precisely this issue that brings Plaintiff before the Court in this case.

II. Plaintiff's Claims

Plaintiff is a chiropractic practice that provides "medical, chiropractic and holistic care, including wellness and whole-body treatment for patients in the Florence and greater Piedmont area of South Carolina." ECF No. 5-2 at 2. Plaintiff participates in the Medicare system and a substantial percentage of its revenue comes from Medicare reimbursements. Id. "Prior to 2015, [Plaintiff] earned annual gross revenues of approximately $6.8 million." Id. Medicare reimbursements constituted thirty-one percent (31%) of those gross revenues. Id.

On or about September 4, 2012, AdvanceMed, the ZPIC for South Carolina, opened an investigation into Plaintiff's medical billing. ECF No. 1 at 2. On July 1, 2013, AdvanceMed conducted an unannounced audit of Plaintiff's facility in Florence and notified Plaintiff that it was reopening claims made within the prior four years. Id. The Notice of Review requested Plaintiff "provide every document and record supporting billing for 15 Medicare beneficiaries between June 2012 and April 2013." Id. at 2. Plaintiff provided the documentation, and, on November 3, 2014, AdvanceMed issued a Notice of Suspension of Medicare Payments to Plaintiff. Id. The Notice of Suspension "stated a post-payment review of 25 Medicare Part B claims result[ed] in a 97.8% denial rate." Id. at 3.

On December 3, 2014, AdvanceMed requested documents supporting billing for 80 Medicare beneficiaries between September 2010 and September 2014, which AdvanceMed claims constituted a statistically valid sample of Plaintiff's Part B claims. Id. Plaintiff provided the required documentation. Id. AdvanceMed determined that $2,507.91 of the Part B claims and $33,710.40 of the DME claims from...