Clarinda Home Health v. Shalala, 96-1561

• Decision Date: 13 June 1996
• Docket Number: No. 96-1561,96-1561
• Citation: 100 F.3d 526
• Parties: CLARINDA HOME HEALTH, formerly known as Nodaway Valley Skilled Services, Inc.; Jay Eickemeyer, Appellants, v. Donna SHALALA, Secretary of Health and Human Services; Medicare IASD Health Services Corporation, Appellees. Submitted:
• Court: U.S. Court of Appeals — Eighth Circuit

Page 526

100 F.3d 526

CLARINDA HOME HEALTH, formerly known as Nodaway Valley Skilled Services, Inc.; Jay Eickemeyer, Appellants, v. Donna SHALALA, Secretary of Health and Human Services; Medicare IASD Health Services Corporation, Appellees.

No. 96-1561

United States Circuit Court of Appeals,

Eighth Circuit

Submitted: June 13, 1996

Filed: November 18, 1996

Appeal from the United States District Court for the Southern District of Iowa.

Alfredo Parrish, Des Moines, IA, for appellants.

Kathleen Deal, Des Moines, IA (Don C. Nickerson, U.S. Atty. on the brief), for appellees.

Before BEAM, JOHN R. GIBSON, and HANSEN, Circuit Judges.

JOHN R. GIBSON, Circuit Judge.

Clarinda Home Health and Jay Eickemeyer appeal from an order of the district court denying their motion for a preliminary injunction restraining Donna Shalala, Secretary of Health and Human Services, and Medicare IASD Health Services Corporation from suspending Medicare payments to Clarinda Home Health without a hearing. The district court denied the claim for injunctive relief because of Clarinda's failure to show a probability that it would succeed on the merits of either its procedural due process liberty interest claim or its procedural due process property interest claim. On appeal, Clarinda makes numerous claims of error, and the Secretary responds that the courts are without jurisdiction to consider Clarinda's claims. We granted Clarinda's motion for injunctive relief enjoining the Secretary from suspending past and future Medicare payments during the pendency of this appeal. We conditioned this grant of injunctive relief upon Clarinda's posting of a bond in an amount and under the terms and conditions as set by the district court, with which Clarinda successfully complied. We dismiss this appeal and vacate the stay pending appeal for want of subject matter jurisdiction and direct the district court to dismiss the complaint for want of subject matter jurisdiction.

There is little dispute as to the facts. Clarinda Home Health, formerly known as Nodaway Valley Skilled Services, Inc., provided health services to elderly and handicapped persons in southern Iowa. In May of 1993 Clarinda Home Health was certified by Medicare to be reimbursed for health care supplies, products, and services provided to its patients who qualified for Medicare benefits. On December 21, 1995, Medicare IASD Health Services Corporation, Clarinda's intermediary, notified Clarinda that an investigation was being conducted for acts of fraud and/or willful misrepresentation, and that it was suspending all payments to Clarinda for services billed to the Medicare program. The notification letter stated that an investigation by the United States Department of Justice and the Federal Bureau of Investigation had produced reliable evidence that Nodaway Valley Skilled Services, Inc. (Clarinda) may have committed acts of fraud and/or willful misrepresentation regarding claims submitted for Medicare reimbursement. As a result, Clarinda's intermediary withheld payments totaling nearly $65,000 for Medicare services already rendered by Clarinda.

Clarinda sought injunctive relief to enjoin the Secretary and Medicare IASD Health Services Corporation from suspending Medicare payments to Clarinda without a hearing. The district court recognized that 42 C.F.R. Section(s) 405.371(b) (1995), which authorizes suspension of payment where authorities have obtained reliable evidence of fraud or willful misrepresentation, provided the authority for the decision to suspend payment.

The district court conducted the four-part inquiry outlined in Dataphase Systems, Inc. v. C L Systems, Inc., 640 F.2d 109, 114 (8th Cir. 1981) (en banc), and denied relief. It first determined that the suspension would cause irreparable harm to the plaintiffs. Next, it found that Clarinda's interest in the potential closing of its business outweighed the government's interest in prohibiting fraudulent Medicare payments. The district court then looked to the merits of Clarinda's due process claims and determined that there was no probability that Clarinda would succeed on these claims. Finally, because the court found that other providers could care for Clarinda's patients if Clarinda was no longer able to provide services, the court rejected Clarinda's argument that the grant of an injunction would serve the public interest.

Clarinda makes numerous claims of error with respect to the district court's order, but in view of our conclusion that the Secretary properly has raised an issue as to our jurisdiction over the subject matter of Clarinda's suit, we need not consider those arguments. We review the question of subject matter jurisdiction de novo. See Drevlow v. Lutheran Church, Missouri Synod, 991 F.2d 468, 470 (8th Cir. 1993).

Before the district court's ruling, the Secretary filed a motion to dismiss this action, asserting that the district court lacked jurisdiction to hear Clarinda's suit. The district court, however, did not rule on this motion before proceeding to the merits. The Secretary raises the lack of jurisdiction again before this court.

The Secretary points to 42 U.S.C. Section(s) 405(h) (1994) which specifically exempts 28 U.S.C. Section(s) 1346 (1994) as a jurisdictional basis for actions arising under the Social Security Act, and explains that this preclusive section has been incorporated into the Medicare Act by reference through 42 U.S.C. Section(s) 1395ii (1994). Next, the Secretary points to Heckler v. Ringer, 466 U.S. 602 (1984), which dealt specifically with the Medicare provisions of the Social Security Act, and argues that the temporary withholding of Medicare payments is not a final decision subject to judicial review under 42 U.S.C. Section(s) 405(g) (1994). Clarinda responds that the district court had subject matter jurisdiction pursuant to 28 U.S.C. Section(s) 1331 and 1336 (1994) and that this Court now has subject matter jurisdiction based on 28 U.S.C. Section(s) 1291 (1994).

I.

The Medicare program is divided into two parts. 42 U.S.C. Section(s) 1395-1395ccc (1994). Part A of the program deals with hospitalization benefits. Part B of the program is a supplementary medical insurance program for the aged and disabled. To administer the Medicare program, Congress has authorized the Secretary to enter into contracts with companies, known as "carriers," to perform actions on behalf of the Secretary. 42 U.S.C. Section(s) 1395u. Carriers are authorized to complete several tasks including: determining the rates and proper payment amounts to providers of services; auditing the records of providers; and receiving and accounting for payments made to providers.

The regulation at issue in this lawsuit, 42 C.F.R. Section(s) 405.371(b), allows the carrier to suspend payment to the provider where the carrier has reliable evidence of willful misrepresentation or fraud. Section 405.371(b) supplied the authority to suspend payments to Clarinda. This section provides:

(b) Fraud or misrepresentation. The provisions of paragraph (a) of this section [allowing for notice and an opportunity to respond] shall not apply where the intermediary or carrier has reliable evidence that the circumstances giving rise to the need for a suspension of payments involves fraud or willful misrepresentation. Instead, the intermediary or carrier may suspend payments without first notifying the provider or other supplier of an intention to suspend payments.

Under this provision, authorities are not required to give a provider prior notice of the suspension of payments and the provider has no right to the payments or a hearing while the Secretary investigates the underlying charges. Upon the conclusion of the investigation, the intermediary transfers the withheld funds to the provider if the investigation failed to establish evidence of fraud. Notably, the temporary withholding of payments pursuant to 42 C.F.R. Section(s) 405.371(b) is not a final determination of exclusion from the Medicare program, but instead is a provision designed to protect the government from suffering greater losses. If authorities establish evidence of fraud, the Secretary may then make a final determination to exclude the provider from the Medicare program. After the Secretary's final determination, authorities must supply the provider with notice of the proposed action and a hearing. 42 C.F.R. Section(s) 1001, 1005 (1994). Following this hearing, if the Department concludes that exclusion is the appropriate sanction, the Secretary is required to provide "reasonable notice to the public." 42 U.S.C. Section(s) 1320a-7(c)(1) (1994). The excluded party is then entitled to notice and judicial review pursuant to 42 U.S.C. Section(s) 405(g).

II.

We must determine whether subject matter jurisdiction exists over Clarinda's claim. We first look to the provisions of 42 U.S.C. Section(s) 405(h). This section is part of the Social Security Act, but is incorporated into the Medicare Act by 42 U.S.C. Section(s) 1395ii. Section 405(h) provides:

The findings and decision of the Commissioner of Social Security after a hearing shall be binding upon all individuals who were parties to such hearing. No findings of fact or decision of the Commissioner of Social Security shall be reviewed by any person, tribunal, or governmental agency except as herein provided. No action against the United States, the Commissioner of Social Security, or any officer or employee thereof shall be brought under sections 1331 or 1346 of title 28 to recover on any claim arising under this subchapter.

The scope of section 405(h) has been the subject of much litigation. The Supreme Court has held that section 405(h) "extends to any action seeking to recover on any Social Security claim." Weinberger v. Salfi, 422 U.S. 749, 762 (1975). The considerations behind the Social Security Act that led Congress to limit judicial review are also applicable to the Medicare program....