Excel Home Care v. U.S. Dept. of Hhs

• Decision Date: 29 October 2004
• Docket Number: No. CIV.A.03-CV-11767-GA.,CIV.A.03-CV-11767-GA.
• Parties: EXCEL HOME CARE, INC., Plaintiff, v. UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Defendant.
• Court: United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of Massachusetts

Page 565

316 B.R. 565

EXCEL HOME CARE, INC., Plaintiff, v. UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Defendant.

No. CIV.A.03-CV-11767-GA.

United States Bankruptcy Court, D. Massachusetts.

October 29, 2004.

Michael B. Feinman, Law Offices of Michael B. Feinman, Andover, MA, for Excel Home Care, Inc., Plaintiff.

ORDER

O'TOOLE, District Judge.

Order entered Order Adopting Report and Recommendation. No objection having been received, after review the Report and Recommendation is adopted. The motion to dismiss is Granted and the action is Dismissed.

REPORT AND RECOMMENDATION ON DEFENDANT'S MOTION TO DISMISS (# 3)

I. INTRODUCTION

On September 15, 2003, Excel Home Care, Inc. ("Excel" or "plaintiff") filed a two-count complaint against the United States Department of Health and Human Services ("DHHS" or "defendant"). (# 1) In Count I the plaintiff alleges that by ignoring the terms and provisions of Excel's confirmed Chapter 11 Plan of Reorganization, DHHS breached its contractual obligations to Excel. (# 1, ¶¶ 16, 17) For the same reason DHHS is alleged to have violated the provisions of Title 11 U.S.C. § 1141(a) in Count II. (# 1, ¶¶ 18, 19)

In lieu of answering the complaint, on November 24, 2003, the DHHS filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6). (# 3) The DHHS argues in its supporting memorandum of law that Title 42 U.S.C. § 405(h), made applicable to Medicare care claims by Title 42 U.S.C. § 1395ii, precludes federal question jurisdiction in this case and second, that even if the Court, in fact, has subject matter jurisdiction, Excel fails to state a claim because the DHHS maintains a right of recoupment. (# 4) On December 9, 2003, Excel submitted a memorandum of law in opposition to the dispositive motion. (# 5) At this juncture, the motion to dismiss is poised for resolution.

II. FACTS

From all that appears, the facts of this case are undisputed. Excel, a Massachusetts corporation, is home health care provider that receives reimbursement for services provided to Medicare beneficiaries from the DHHS under Part A of the Medicare Program. (# 1, ¶ 1; # 4 at 1) On November 5, 2001, Excel filed a Chapter 11 bankruptcy petition with the United States Bankruptcy Court for the District of Massachusetts, Case No. 01-46770-JBR. (# 1, ¶ 5) The DHHS, as a creditor in the bankruptcy proceedings, filed a proof of claim. (# 1, ¶ 6) Thereafter the parties reached an agreement to the effect that Excel owed the DHHS a total of $438,236.68 at the time that it filed the bankruptcy petition. (# 1, ¶ 7 and Exh. A, 4.3)

On May 29, 2002, Excel filed its First Amended Plan of Reorganization ("Plan"). (# 1, ¶ 8 and Exh. A) Approximately nine months later on February 20, 2003, the Bankruptcy Court confirmed the Plan. (# 1, ¶ 9 and Exh. B) As stated within the terms and provisions of its Order, the Court found that the Plan had been accepted by the DHHS. (# 1, Exh. B, ¶ 3(e)) Moreover, the Court ordered that "[f]urthermore, all Creditors of the Debtor shall be satisfied solely from the payments as defined in the Plan, and may not seek other, further or additional payments, compensation and/or consideration from the Debtor." (# 1, Exh. B ¶ 6)

According to the terms of the Plan, DHHS's claims are designated as Class 3 claims. (# 1, ¶ 10 and Exh. A at 5) The Plan provides in section 4.3 that Excel will pay the DHHS in full for the amount owed plus interest over a period not to exceed seven years with payments to be made in monthly installments of $7,000.00. (# 1, ¶ 10 and Exh. A, section 4.3) The plaintiff alleges that the parties "mechanistically" agreed that "the sum of $7,000.00 per month would be withheld by DHHS from its ongoing and continuing payments otherwise to be made to Excel for services rendered to Medicare patients serviced by Excel." (# 1, ¶ 11)

In May of 2003 after the Bankruptcy Court had confirmed the Plan, the DHHS's fiscal intermediary calculated that Excel had been underpaid by $127,001.00 for Medicare reimbursement payments during the year 2000. (# 1, ¶ 12 and Exh. C) In a letter dated May 6, 2003, the intermediary informed Excel of the underpayment. (# 1, Exh. C) However, instead of paying Excel the $127,001.00, the DHHS withheld the funds and deducted the amount of the underpayment from the amount Excel otherwise owed the DHHS for past overpayments pursuant to the Plan. (# 1, ¶ 13)

On July 21, 2003, Excel sent the DHHS a letter to advise that, in its view, withholding the underpaid funds violated the confirmed Chapter 11 Plan. (# 1, ¶ 14 and Exh. D) Excel demanded that the total amount due be turned over to it within 14 days of the letter's issuance. (# 1, ¶ 14 and Exh. D). Having received no response to its demand letter, on September 15, 2003, Excel instituted the present litigation. (# 1, ¶ 15)

III. DISCUSSION

A. Standard Under Rule 12(b)(1)

Pursuant to Rule 12(b)(1), Fed.R.Civ.P., a defendant may move to dismiss an action based on lack of federal subject matter jurisdiction. Because federal courts are considered courts of limited jurisdiction, "federal jurisdiction is never presumed." Viqueira v. First Bank, 140 F.3d 12, 16 (1st Cir.1998). Instead, "`the party invoking the jurisdiction of a federal court carries the burden of proving its existence.'" Murphy v. United States, 45 F.3d 520, 522 (1st Cir.1995), cert. denied, 515 U.S. 1144, 115 S.Ct. 2581, 132 L.Ed.2d 831 (1995) (quoting Taber Partners, I v. Merit Builders, Inc., 987 F.2d 57, 60 (1 Cir.), cert. denied, 510 U.S. 823, 114 S.Ct. 82, 126 L.Ed.2d 50 (1993)).

Once a defendant challenges the jurisdictional basis for a claim under Rule 12(b)(1), the plaintiff bears the burden of proving jurisdiction. Thomson v. Gaskill, 315 U.S. 442, 446, 62 S.Ct. 673, 86 L.Ed. 951 (1942); Aversa v. United States, 99 F.3d 1200, 1209 (1st Cir.1996); Murphy, 45 F.3d at 522. The First Circuit has held that the proponent must clearly indicate the grounds upon which the Court may properly exercise jurisdiction over the matter presented: "[I]t is black-letter law that jurisdiction must be apparent from the face of the plaintiffs' pleading." PCS 2000 LP v. Romulus Telecomms., Inc., 148 F.3d 32, 35 (1st Cir.1998) (quoting Viqueira, 140 F.3d at 18). Hence, if the plaintiff fails to show a basis for either diversity or federal question jurisdiction the district court must grant the defendant's Rule 12(b)(1) motion.

In ruling on a motion to dismiss for lack of jurisdiction, "the district court must construe the complaint liberally, treating all well-pleaded facts as true and indulging all reasonable inferences in favor of plaintiff." Aversa, 99 F.3d at 1210; Murphy, 45 F.3d at 522. That is not to say that this leniency eliminates the plaintiff's burden of proving an appropriate jurisdictional basis. Indeed, a plaintiff cannot assert a proper jurisdictional basis "merely on `unsupported conclusions or interpretations of law.'" Murphy, 45 F.3d at 522 (quoting Washington Legal Foundation v. Massachusetts Bar Foundation, 993 F.2d 962, 971 (1st Cir.1993)).

B. Federal Question Jurisdiction

In the complaint, Excel alleges that the Court may properly exercise jurisdiction pursuant to Title 28 U.S.C. §§ 1331 and 1346(b). Section 1331 provides the district court with "original jurisdiction of all civil actions arising under the Constitution, laws or treaties of the United States," while § 1346(b) permits the United States to be sued as a defendant in such matters. The DHHS contends that these jurisdictional allegations are inadequate and that instead 42 U.S.C. § 405(h), made applicable to Medicare claims by 42 U.S.C. § 1395ii, applies to the matter at hand. Section 405(h) provides, in pertinent part, "[n]o action against the United States ... shall be brought under section 1331 or 1346 of Title 28 to recover on any claim arising under this subchapter." In its opposition Excel argues that the Court may properly enforce this confirmed Chapter 11 Plan pursuant to 11 U.S.C. § 1141(a) and, consequently, that federal question jurisdiction exists.

The threshold issue presented is whether jurisdiction is proper because this is a matter arising under the bankruptcy law or whether the Court is precluded from exercising jurisdiction because this is a Medicare dispute.

1. The Medicare Act: An Overview

In 1965, Congress enacted Title XVIII of the Social Security Act, 79 Stat. 291, as amended, 42 U.S.C. §§ 1395 et seq., establishing Federal Health Insurance for the Aged or Medicare. Part A of the Medicare Act allows reimbursement for services rendered by Medicare service providers such as hospitals or home health care medical providers like Excel that have entered into a provider agreement with the Secretary of the Department of Health and Human Services. Title 42 U.S.C. § 1395(c); see also Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1, 6, 120 S.Ct. 1084, 146 L.Ed.2d 1 (2000); Heckler v. Ringer et al., 466 U.S. 602, 605, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984). The DHHS contracts with fiscal intermediaries, who, after determining the reasonable costs of services rendered, disburse these reimbursement payments. Title 42 U.S.C. §§ 1395h, 1395u. Throughout the year, fiscal intermediaries make estimated payments based upon the actual costs the providers incurred in the previous fiscal year. These payments will then be adjusted upon a determination of an overpayment or underpayment for services rendered. Title 42 U.S.C. § 1395g(a).

Because Excel, as a Part A Medicare service provider, challenges the method by which the DHHS disseminates its reimbursement payments, the DHHS argues that the dispute arises under the Medicare Act. The contention is that the particular limitations set forth in the Medicare regulations govern and supersede any provision of the Bankruptcy Code conferring jurisdiction over this matter to the Court.

2. Jurisdiction under the Medicare Act

As the First Circuit noted in Kechijian v. Califano, 621 F.2d 1, 3 (...