Cumberland Cnty. Hosp. Sys., Inc. v. Burwell

• Decision Date: 07 March 2016
• Docket Number: No. 15–1393.,15–1393.
• Citation: 816 F.3d 48
• Parties: CUMBERLAND COUNTY HOSPITAL SYSTEM, INC., d/b/a Cape Fear Valley Health System, Plaintiff–Appellant, v. Sylvia Mathews BURWELL, in her official capacity as Secretary of Health and Human Services, Defendant–Appellee. Fund for Access to Inpatient Rehabilitation, Amicus Supporting Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

816 F.3d 48

CUMBERLAND COUNTY HOSPITAL SYSTEM, INC., d/b/a Cape Fear Valley Health System, Plaintiff–Appellant,

v. Sylvia Mathews BURWELL, in her official capacity as Secretary of Health and Human Services, Defendant–Appellee.Fund for Access to Inpatient Rehabilitation, Amicus Supporting Appellant.

No. 15–1393.

United States Court of Appeals, Fourth Circuit.

Argued: Jan. 26, 2016.

Decided: March 7, 2016.

ARGUED:Kathryn Frances Taylor, K & L Gates LLP, Morrisville, North Carolina, for Appellant. Joshua Marc Salzman, United States Department of Justice, Washington, D.C., for Appellee. ON BRIEF:Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Mark B. Stern, Civil Division, United States Department of Justice, Washington, D.C.; Thomas G. Walker, United States Attorney, Office of the United States Attorney, Raleigh, North Carolina; William B. Schultz, General Counsel, Janice L. Hoffman, Associate General Counsel, Susan Maxson Lyons, Deputy Associate General Counsel, Kirsten Friedel Roddy, Attorney, United States Department of Health & Human Services, Washington, D.C., for Appellee. Ronald S. Connelly, Powers Pyles Sutter & Verville, PC, Washington, D.C., for Amicus Curiae.

Before TRAXLER, Chief Judge, and WILKINSON and NIEMEYER, Circuit Judges.

Affirmed by published opinion. Judge NIEMEYER

wrote the opinion, in which Chief Judge TRAXLER and Judge WILKINSON joined.

NIEMEYER

, Circuit Judge:

Cumberland County Hospital System, Inc., d/b/a Cape Fear Valley Health System ("Cape Fear Health System" or "the Hospital System"), commenced this action to obtain a writ of mandamus compelling the Secretary of the Department of Health and Human Services ("HHS") to adjudicate immediately its administrative appeals on claims for Medicare reimbursement. With over 750 of its appeals on such claims awaiting assignment to an Administrative Law Judge ("ALJ") for more than 90 days, the Hospital System asserts that the Secretary's delay violates the congressional mandate that its appeals be heard and decided by ALJs within 90 days. See 42 U.S.C. § 1395ff(d)(1)(A)

.

The parties agree that, as of February 2014, the Secretary had 480,000 appeals awaiting assignment to an ALJ, and the Secretary conceded in her brief that the number had by then climbed to more than 800,000 appeals, creating a ten-year backlog. While acknowledging the unacceptability of the backlog, the Secretary attributes it to an increased number of appeals within the Medicare system and inadequate funding by Congress to hire additional personnel.

The district court dismissed the Hospital System's complaint, relying on two independent grounds. It held (1) that the Hospital System does not have a clear and indisputable right to an ALJ hearing within a 90–day time frame, as required for issuance of a mandamus order, and (2) that the political branches, rather than the courts, are best suited to address the backlog in the administrative process. We affirm.

While we agree that the delay in the administrative process for Medicare reimbursement is incontrovertibly grotesque, the Medicare Act does not guarantee a healthcare provider a hearing before an ALJ within 90 days, as the Hospital System claims. Rather, it provides a comprehensive administrative process—which includes deadlines and consequences for missed deadlines—that a healthcare provider must exhaust before ultimately obtaining review in a United States district court. Indeed, within that administrative process, a healthcare provider can bypass administrative reviews if such reviews are delayed, "escalating" for review by a United States district court within a relatively expeditious time. The issuance of a judicial order now, however, directing the Secretary to hear the Hospital System's claims in the middle of the administrative process, would unduly interfere with the process and, at a larger scale, the work of the political branches. Moreover, such intervention would invite other healthcare providers suffering similar delays to likewise seek a mandamus order, thereby effectively causing the judicial process to replace and distort the agency process.

I

Cape Fear Health System operates a number of facilities in eastern North Carolina, delivering medical services to, among others, beneficiaries of Medicare. The Medicare Act establishes a federally subsidized health insurance program for the elderly and disabled that is administered by the Secretary. See 42 U.S.C. § 1395 et seq.

In 2012 and 2013, the Secretary denied payment to the Hospital System on over 900 claims for reimbursement for Medicare services that she had initially authorized. By September 2014, the Hospital System had over 750 appeals on these claims that had been pending for more than 90 days before the Office of Medicare Hearings and Appeals ("OMHA") within HHS. Those appeals related to claims for some $12.3 million in reimbursement. The Secretary has not even acknowledged receipt of some of the appeals, and with respect to others, she has reported a delay of over two years in assigning them to an ALJ. Because reimbursement of such a large sum is essential to the Hospital System's operations, the Hospital System commenced this action for a writ of mandamus, ordering the Secretary to docket, assign to an ALJ, and decide its appeals within 90 days, as required by the Medicare Act. See 42 U.S.C. § 1395ff(d)(1)(A)

. It also seeks a declaratory judgment that the Secretary's "delay in adjudication of Medicare appeals violates federal law."

In its complaint, the Hospital System alleged that the number of appeals to ALJs quintupled during the two years of 2012 and 2013, increasing from 92,000 to 460,000, and that the ALJs' workload increased by almost 300% from fiscal year 2012 to fiscal year 2013. It alleged that, as of February 2014, 480,000 appeals were awaiting assignment to ALJs. The Secretary does not deny the existence of the backlog, nor its size, as the figures alleged by the Hospital System are those published by HHS. Indeed, in her brief, the Secretary acknowledged that the backlog has grown rapidly to more than 800,000 appeals and that, with OMHA's current staffing of ALJs, it would take over ten years for the ALJs to dispose of those appeals. The allegations of the parties do, however, attribute the backlog to different causes.

The Secretary asserts that the backlog is the result of an increased utilization of Medicare-covered services; the additional appeals from audits conducted under the Recovery Audit Program instituted in 2010; and additional Medicaid State Agency appeals of Medicare coverage denials for beneficiaries enrolled in both Medicare and Medicaid. She notes that she has been unable to reduce or even stabilize the backlog because congressional funding has remained relatively stagnant during the last five years and additional ALJs therefore could not and cannot be hired. She states, however, that the President's 2016 budget proposes more than tripling the funding for OMHA and, in addition, proposes new processes that would facilitate the resolution of appeals at earlier stages in the administrative process. Finally, the Secretary points out that Congress has been aware of the existing backlog for some time, has recognized the need for a legislative solution, and, indeed, is working on a solution.

Cape Fear Health System does not disagree completely, but it contends that the backlog is mainly due to the Secretary's mismanagement of HHS resources. The Hospital System points out that, while the agency has proposed pilot programs for alternative dispute resolution with respect to some types of reimbursement, it has not made those programs available for the types of reimbursement being claimed by the Hospital System. Furthermore, the Hospital System contends that the increase in appeals from audits conducted pursuant to the Recovery Audit Program is attributable to the perverse incentives of that program, which pays contractors contingency compensation based on monies they recover in denying improper or excessive claims.

Regardless of the cause, however, the parties agree, and the district court found, that appeals have "skyrocketed" and have "overwhelmed" the Medicare reimbursement process.

The district court granted the Secretary's motion to dismiss the Hospital System's complaint under Federal Rule of Civil Procedure 12(b)(6)

, relying on two independent grounds for doing so. First, the court concluded that the Hospital System's complaint failed to state a plausible claim for a mandamus order because (1) it failed to demonstrate a "clear and indisputable right" to relief, as Congress did not grant the Hospital System "an absolute right to an ALJ hearing ... within the 90–day timeframe," and (2) it failed to demonstrate that the Secretary has "a clear duty to provide such a hearing" within the 90–day time frame. Second, as a matter of discretion, the court concluded that to grant mandamus relief would inappropriately "intermeddle" with the agency's problem-solving efforts and would fail to recognize "HHS's comparative institutional advantage in crafting a solution to the delays in the adjudication of appeals." The court explained that "the political branches are best-suited to alleviate OMHA's crippling delays." The court also noted in this regard that putting the Hospital System "at the head of the queue," where doing so would simply move all others back one space and would produce no net gain, should be avoided as a matter of equity.

The district court also denied the Hospital System's claim for declaratory relief, reasoning that, because the Declaratory Judgment Act does not supply a right of action in the absence of a valid substantive claim, dismissal of the Hospital System's declaratory judgment must necessarily follow dismissal of its mandamus claim.

Cape Fear Health System filed this appeal.

II

Mandamus is a "drastic" remedy that must be reserved for "extraordinary situations" involving the performance of official acts or duties. Kerr v....