Angelitos Health Care, Inc. v. Becerra
| Decision Date | 01 February 2022 |
| Docket Number | Civil Action 7:20-CV-0035 |
| Parties | ANGELITOS HEALTH CARE, INC., Plaintiff, v. XAVIER BECERRA, Secretary, United States Department of Health and Human Services, Defendant. |
| Court | U.S. District Court — Southern District of Texas |
J. SCOTT HACKER, UNITED STAFES MAGISTRATE JUDGE
Plaintiff Angelitos Health Care, Inc. seeks judicial review of a final decision by the Secretary (the "Secretary") of the U.S. Department of Health and Human Services ("HHS") that Plaintiff was overpaid by around $1.3 million in Medicare claims for home health care services.[1]
An HHS program integrity contractor audited a sample of beneficiary claims submitted by Plaintiff during a two-year period determining the amount of overpayment by a statistical extrapolation of the sample claims. Upon receiving notice of the overpayment, Plaintiff invoked the multi-level Medicare administrative review process. Plaintiff challenged the determination that some of the sample claims were not covered by Medicare, as well as the statistical validity of the sampling method and extrapolation procedures.
After partially favorable rulings at the initial levels of administrative review, an Administrative Law Judge ("ALJ") issued a decision that was also partially favorable to Plaintiff. Although the ALJ upheld the statistical sample and extrapolation methodologies, the ALJ found that some of the sample claims were fully or partially covered by Medicare. Plaintiff then filed a request for a review with the Medicare Appeals Council (the "Council"). The Council vacated and remanded the ALJ's decision as to several sample claims, noting that the records for such beneficiaries were missing or incomplete. The Council also reversed on one sample claim determining that it was indeed covered by Medicare, and either adopted or modified the decision that the remaining claims were not covered. The Council did not address Plaintiffs statistical sampling and extrapolation claim on the basis that it was not properly raised.
Appealing that final decision, Plaintiff raises four main claims that, for practical purposes, are organized as follows: (1) the statistical sampling and extrapolation procedures were improper; (2) the Council erred in determining that sample claims failed to meet conditions of Medicare participation and payment; (3) the Council applied incorrect standards in determining that sample claims were not covered and that such determinations were not supported by substantial evidence; and (4) any liability for overpayment is otherwise waived or limited by statute.
Pending now are the parties' cross motions for summary judgment. (Dkt. Nos. 26 & 27). The parties have filed respective responses to these motions. (Dkt. Nos. 28 & 29). Plaintiff has also filed a Motion for Attorney's Fees (Dkt. No. 30), which the Secretary opposes (Dkt. No. 32).
This case was referred to the Magistrate Judge for report and recommendation pursuant to 28 U.S.C. § 636(b)(1). After review of the parties' briefing, the record, and relevant law, the Magistrate Judge RECOMMENDS that Plaintiffs Motion for Summary Judgment (Dkt. No. 27) be GRANTED in part and DENIED in part, that the Secretary's Motion for Summary Judgment (Dkt. No. 26) be GRANTED in part and DENIED in part, that the Motion for Attorney's Fees (Dkt. No. 30) be DENIED as premature, and that the final decision of the Secretary be VACATED and REMANDED to the agency for further proceedings consistent herewith.
Medicare is a federally funded health insurance program for the elderly and disabled. Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 506 (1994) (quotations omitted). The program, among other things, reimburses health care providers who render services to its beneficiaries. Maxmed Healthcare, Inc. v. Price, 860 F.3d 335, 337 (5th Cir. 2017). The Centers for Medicare and Medicaid Services ("CMS"), a division of HHS, is responsible for administering the Medicare program. See Big Bend Hosp. Corp. v. Thompson, 88 Fed.Appx. 4, 5 (5th Cir. 2004) (per curiam).
As a general matter, Medicare does not cover services that "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). More specific coverage requirements may apply depending on the nature of the services, such as the home health services at issue here.
Home health services consist of medical care, such as skilled nursing and physical therapy services, provided to patients in their homes. See 42 U.S.C. § 1395x(m). To qualify for Medicare coverage for such services, a beneficiary must meet three main conditions. See 42 C.F.R. § 409.42 (2009). First, the beneficiary must be confined to the home, or "homebound." Id. at 409.42(a). A beneficiary is homebound if they "ha[ve] a condition, due to an illness or injury, that restricts the[ir] ability ... to leave [their] home except with the assistance of another individual or the aid of a supportive device [, ]" or if they have "a condition such that leaving [their] home is medically, contraindicated." 42 U.S.C. § 1395f(a). Second, the beneficiary must be under a physician's care. 42 C.F.R. § 409.42(b) (2008). Third, they must need skilled medical services. Id. at § 409.42(c). CMS promulgates other regulations and guidance that further elaborate on coverage conditions, including the Medicare Benefit Policy Manual (the "MBPM"), which CMS periodically updates.
CMS contracts with Medicare Administrative Contractors ("MACs"), which are private government contractors, to process and make payments on Medicare claims by service providers. See, e.g., 42 U.S.C. § 1395kk-l. To expedite claims processing, MACs typically reimburse providers for services before reviewing the medical records relating to the claims and verifying that the claims are valid. See John Balko & Assocs., Inc. v. Sec 'y U.S. Dep 't of Health & Hum. Servs., 555 Fed.Appx. 188, 190 (3d Cir. 2014). "A provider's claims which were initially paid as a matter of course may eventually be reviewed by a Zone Program Integrity Contractor ("ZPIC"), and if the ZPIC's audit determines that the provider was overpaid, the MAC sends the provider a letter demanding repayment." Infinity Healthcare Servs., Inc. v. Azar, 349 F.Supp.3d 587, 590 (S.D. Tex. 2018). This audit process typically involves the use of statistical sampling and extrapolation procedures, which are a permissible method of calculating overpayments. See Rio Home Care, LLC v. Azar, 2019 WL 1411805, at *3 (S.D. Tex. March 11, 2019), report and recommendation adopted, 2019 WL 1409733 (S.D. Tex. Mar. 28, 2019). Upon receipt of a . demand letter, a provider may challenge the ZPIC's overpayment decision by invoking the multilevel Medicare administrative review process. See Id. at *2-3.
The Fifth Circuit has summarized the Medicare administrative review process as follows:
Family Rehab.,, Inc. v. Azar, 886 F.3d 496, 499-500 (5th Cir. 2018) ().
A provider dissatisfied with the Secretary's final decision may seek judicial review by commencing a civil action in an appropriate federal district court. 42 U.S.C. § 1395ff(b)(1)(A).
This case stems from a payment audit for home health services that Plaintiff provided from March 4, 2008 through November 30, 2009 (the "Service Period"). (See Dkt. No. 10-4 at 530-31).
On April 1, 2011, Health Integrity, Inc. ("Health Integrity"), a Medicare ZPIC, issued a summary of its audit, which concerned a universe of 367 paid Service Period claims. (Id.). Health Integrity randomly selected a sample of 44 Service Period claims and determined, for varying reasons, that 34 of those claims were not covered by Medicare.[2] (Id.). Regarding these sample claims, Health Integrity determined that the amount of overpayment was $ 183, 229.20. (Id. at 530). Dividing this actual overpayment amount by the number of claims in the sample (i.e., 44) resulted in an average overpayment per claim of $4, 164.30, which figure was used by Health Integrity to calculate a projected overpayment amount of $1, 528, 298.10 for all claims during the Service Period. (Id.). Health Integrity determined that it was "90 [percent] confident that the overpayment was at least $1, 310, 496," which figure constituted Health Integrity's requested amount of overpayment. (Id.).
On July 14, 2011, Plaintiff submitted a request for redetermination...
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