Gen. Med., P.C. v. Azar

• Decision Date: 24 June 2020
• Docket Number: No. 19-1365,19-1365
• Citation: 963 F.3d 516
• Parties: GENERAL MEDICINE, P.C., Plaintiff-Appellant, v. Alex M. AZAR, II, Secretary of the U.S. Department of Health and Human Services, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

963 F.3d 516

GENERAL MEDICINE, P.C., Plaintiff-Appellant,

v.Alex M. AZAR, II, Secretary of the U.S. Department of Health and Human Services, Defendant-Appellee.

No. 19-1365

United States Court of Appeals, Sixth Circuit.

Argued: December 13, 2019

Decided and Filed: June 24, 2020

Rehearing Denied July 27, 2020

OPINION

SILER, Circuit Judge.

General Medicine appeals a post-payment audit that began over fifteen years ago. The audit revealed many of General Medicine's Medicare claims should not have been paid or should not have been paid at the level billed. The auditor requested records from the long-term care facilities where General Medicine provided services but did not request any records from General Medicine. General Medicine did not find out about the audit until it was finished and the overpayment was assessed. General Medicine argues that this assessment should be void or reduced because the auditor failed to give notice of the audit.

Under 42 U.S.C. § 1395ddd(f)(7)(A), Centers for Medicare and Medicaid Services contractors ("CMS contractors") are required to give providers, like General Medicine, notice prior to conducting a post-payment audit. The statute does not provide a remedy if CMS contractors violate this requirement.

The Medicare Appeals Council determined that no remedy should be granted because the lack of notice was inconsequential. The Council explained that failure to provide notice did not prevent General Medicine from ably and thoroughly arguing the principal issues resulting from the audit, the validity of the sampling methodology, and the coverage of the reviewed claims over the course of several years. The Council also noted that the addition of more medical records would not have materially impacted its findings. The district court upheld the Council's conclusion. We find that substantial evidence supports the Council's determination that General Medicine was not prejudiced by the lack of notice. Therefore, we AFFIRM .

I. FACTUAL BACKGROUND

General Medicine is a medical services provider whose physicians and nurse practitioners perform services for patients in long-term care facilities. General Medicine bills Medicare for most services. Medicare is a federally subsidized health insurance for the elderly and those with disabilities.

42 U.S.C. § 1395 et seq. The Secretary of the U.S. Department of Health and Human Services ("Secretary") acts through the Centers for Medicare and Medicaid Services ("CMS") to administer Medicare. Id. § 1395hh(a)(1). CMS contracts with private entities, known as Medicare Administrative Contractors ("CMS contractors"), to help administer the program, including investigating fraud and abuse. Id. §§ 1395kk-1, 1395ddd.

CMS contractors may conduct a post-payment audit of providers to ensure that the Medicare services that providers are billing are medically necessary and meet the requirements of the Medicare program. See id. § 1395ddd(b). In a post-payment audit CMS contractors review a random sample of a provider's Medicare claims. See id. § 1395ddd(f)(4). CMS contractors will review the records and then calculate an error rate based on the review. If there is a sustained or high level of payment error, the CMS contractor will extrapolate that error rate over the provider's total Medicare claims to determine a total amount of overpayment. See id. § 1395ddd(f)(3).

If a provider objects to the CMS contractor's overpayment determination, there are four levels of administrative review that the provider can pursue: (1) redetermination by the Medicare Administrative Contractor; (2) reconsideration by a Qualified Independent Contractor; (3) a hearing before an Administrative Law Judge; and (4) review of the Administrative Law Judge's decision by the Medicare Appeals Council. See id. § 1395ff; 42 C.F.R. §§ 405.900 – 405.1140. After exhausting all four levels of administrative review, the provider can seek judicial review in a federal district court. 42 U.S.C. § 1395ff(b)(1)(A).

Beginning in 2002, a CMS contractor, AdvanceMed, initiated a series of audits after the CMS fraud unit received complaints about General Medicine's billing practices. In July 2004 AdvanceMed initiated an audit of all General Medicine physicians without providing any notice to General Medicine. To conduct the audit AdvanceMed sent records requests to twelve facilities where General Medicine's physicians provided services. Specifically, AdvanceMed requested the medical records for 382 claims involving 278 General Medicine patients that received Medicare services between January 1, 2002, and March 24, 2004. Between 2002 and 2004 General Medicine's clinicians kept their medical records in the patient charts at the facilities where they worked but did not maintain offices in the facilities. General Medicine was not notified of these requests, and AdvanceMed did not request any records from General Medicine.

Based on these records AdvanceMed determined that only 35 of the 382 claims were allowed as billed and 33 of the claims were allowed at different levels than billed. The remaining 314 claims were denied: 3 because they did not meet policy guidelines; 73 because there was no documentation to support the services; and 238 were considered medically unnecessary.

General Medicine first learned of this audit when it received a letter with the results in January 2007. The letter indicated that AdvanceMed determined that General Medicine had been overpaid with regard to 337 claims in the amount of $16,778.80. Under 42 U.S.C. § 1395ddd(f)(3), the overpayment was extrapolated to a universe of 41,818 claims and the total amount of overpayment assessed and demanded was $1,836,646.56.

II. PROCEDURAL HISTORY

General Medicine filed for a redetermination of the overpayment assessment and engaged in the administrative review process for several years. At each level of the process General Medicine contested individual overpayments and was able to obtain significant reductions in the overpayment assessment. At one point the total extrapolated overpayment was reduced to $1,073,183.00. The Medicare Appeals Council further reduced the amount of overpaid claims and ordered CMS to recalculate the overpayment to conform with its decision.

In addition to challenging individual overpayments, General Medicine sought to invalidate the entire overpayment assessment due to lack of notice. In the alternative, General Medicine sought to reduce the assessment to the actual amount of overpayments as opposed to the extrapolated amount. The Medicare Appeals Council rejected General Medicine's notice argument as inconsequential because: (1) the statute does not provide a consequence for the failure to provide notice; and (2) failure to provide notice did not prevent General Medicine from "over these many years, ably and thoroughly argu[ing] the principal issues resulting from the audit, the validity of the sampling methodology, and the coverage of the reviewed claims."

After completing the four-level administrative review process General Medicine sought judicial review in federal court. The district court denied General Medicine's motion for summary judgment and entered judgment in favor of the government, concluding that General Medicine did not demonstrate it suffered any prejudice as a result of the lack of notice.

III. STANDARD OF REVIEW

Our review "is limited to determining whether the district court erred in finding that the [administrative] ruling was supported by substantial evidence" and whether proper legal standards were employed. Heston v. Comm'r of Soc. Sec. , 245 F.3d 528, 534 (6th Cir. 2001) ; see also Cutlip v. Sec'y of Health & Human Servs. , 25 F.3d 284, 286 (6th Cir. 1994) ; 42 C.F.R. § 405.1136(f).

"Substantial evidence is more than a scintilla of evidence but less than a preponderance; it is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Cutlip , 25 F.3d at 286. If there is substantial evidence to support the decision, "it must be affirmed even if the reviewing court would decide the matter differently ... and even if substantial evidence also supports the opposite conclusion." Id. (internal citation omitted). Whether the Medicare Appeals Council made an error of law in applying a statute, however, is reviewed de novo. See Perkins v. Chater , 107 F.3d 1290, 1294 (7th Cir. 1997).

IV. DISCUSSION

A. Whether an overpayment assessment should be invalidated when the government fails to provide notice of a post-payment audit under 42 U.S.C. § 1395ddd(f)(7)(A)

It is an issue of first impression whether an overpayment assessment should be invalidated when the government fails to provide notice of a post-payment audit under 42 U.S.C. § 1395ddd(f)(7)(A). Our analysis must "start, as always, with the language of the statute." Williams v. Taylor , 529 U.S. 420, 431, 120 S.Ct. 1479, 146 L.Ed.2d 435 (2000).

In 2003 Congress passed the Medicare Prescription Drug, Improvement, and Modernization Act ("Medicare Act"). Pub. L. 108-173, 117 Stat. 2066. This Act allows CMS to recover overpayments to providers and permits the use of extrapolation in cases of sustained or high level of payment error. See 42 U.S.C. § 1395ddd(b), (f)(3).

The Act permits the use of post-payment audits as a tool to recover overpayments, but it requires CMS contractors to give a provider written notice "of the intent to conduct [a post-payment] audit." Id. § 1395ddd(f)(7)(A). The statute states in relevant part:

(A) Written notice for post-payment audits. Subject to subparagraph (C), if a medicare contractor decides to conduct a post-payment audit of a provider of services or supplier under this subchapter, the contractor shall provide the provider of services or supplier with written notice (which may be in electronic form) of the intent to conduct such an audit.

Id. The statute provides one exception to the notice requirement: Notice is not required if it would "compromise pending law enforcement activities ... or reveal findings...