Gordian Med., Inc. v. Sebelius, No. CV 10-1202 CAS (FFMx)
| Decision Date | 09 March 2012 |
| Docket Number | No. CV 10-1202 CAS (FFMx) |
| Court | U.S. District Court — Central District of California |
| Parties | GORDIAN MEDICAL, INC. Plaintiff, v. KATHLEEN SEBELIUS, Secretary of Health &Human Services, Defendant. |
ANDRÉ BIROTTE JR.
Secretary of Department of Health & Human Services
FINDINGS OF FACT AND CONCLUSIONS OF LAW
FINDINGS OF FACT
1. The Medicare program, established under Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395-1395ggg, pays for medical care provided to eligible aged and disabled persons. Part A of Medicare generally authorizes payment for covered inpatient hospital care and related services, 42 U.S.C. §§ 1395c to 1395i-5, 42 C.F.R. Part 409. This case involves Part B of Medicare which provides supplementary medical insurance for covered medical services, such as physician services and covered medical supplies, such as durable medical equipment ("DME"). 42 U.S.C. §§ 1395k(a)(1), 1395m(j)(5), 1395x(s)(1), (2)(A), (6), (8), & (9), 42 C.F.R. Part 410 (scope of Part B benefits). The surgical dressings at issue here are considered DME.
2. The Medicare program is administered by the Centers for Medicare & Medicaid Services ("CMS"). CMS acts through private fiscal agents called Medicare Administrative Contractors to administer Medicare Part B. 42 U.S.C. § 1395u; 42 C.F.R. § 421.200. Contractors' functions include making coverage determinations in accordance with the Medicare Act, applicable regulations, the Medicare Part B Supplier Manual, and other agency guidelines. Upon receiving a claim for payment, a contractor determines whether the services are medically necessary and reasonable and meet other Medicare requirements and are, therefore, covered. 42 U.S.C. § 1395y(a). If these criteria are satisfied, the contractor reimburses the Medicare supplier from the Medicare Trust Fund based upon an assignment of benefits executed by the beneficiary. 42 U.S.C. § 1395u(b)(3)(B);
42 C.F.R. § 421.200.
3. DME claims are administered by four regional DME Medicare Administrative Contractors ("DME MACs"). 42 U.S.C. §§ 1395m(a)(12), 1395kk-1; 42 C.F.R. §§ 421.210(b), 421.404(c)(2). Items of DME must be furnished "incident to a physician's service," or by a "supplier" that possesses both a valid Medicare supplier number and DME "billing privileges." 42 U.S.C. §§ 1395m(j)(1), 1395x(d); 42 C.F.R. § 424.57. A DME supplier must submit a timely electronic claim to the Medicare contractor. 42 C.F.R. §§ 424.32(d), 424.44
4. Medicare Part B resembles "a private medical insurance program that is subsidized in major part by the federal government." Schweiker v. McClure, 456 U.S. 188, 190 (1982). As with private medical insurance programs, there are conditions and limitations upon the coverage of services and items. The statute and implementing regulations set forth coverage conditions (42 U.S.C. §§ 1395k, 1395l, 1395x(s)) and exclude certain services and items from coverage under Part B. See also 42 U.S.C. § 1395y(a)(2)-(16); 42 C.F.R. § 411.15(a)-(j).
5. Two important coverage limitations apply to the coverage of all Medicare items or services, including the services at issue in this case. First, the services rendered must be 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. Second, Medicare payment cannot be made unless the party seeking payment furnishes the Secretary with the information required to substantiate medical necessity. 42 U.S.C. § 1395l(e); 42 C.F.R. § 424.5(a)(6).
6. Congress has given the Secretary the authority to issue regulations for determining entitlement to benefits under Medicare Part B. 42 U.S.C. § 1395ff(a). The Secretary has broad authority to explicate the "not reasonable and necessary" coverage exclusion and other coverage provisions in case-specific adjudications through generally applicable rules that may be established by notice and comment rulemaking, or by means of less formal guidance. See Heckler v. Ringer, 466 U.S.602, 617 (1984).
7. A Medicare contractor may issue a "local coverage determination" ("LCD"), which is the contractor's determination as to whether a particular item or service is covered within the contractor's own limited jurisdiction. Id. § 1395ff(f)(2)(B). Absent a governing LCD, the contractor applies the "not reasonable and necessary" coverage exclusion and other coverage criteria to the factual circumstances of an individual claim for benefits. 68 Fed. Reg. 63692, 63693 (Sept. 26, 2003) (final rule). The two Medicare Appeals Council ("Appeals Council") decisions appealed by Gordian each applied an LCD.
8. The Part B payment for covered DME is 80 percent of the lesser of the actual charge for the item or the payment amount determined by the fee schedule payment methodology for DME with certain adjustments. 42 U.S.C. § 1395m(a)(1). See also id. § 1395m(a)(2) ().
9. A Medicare supplier whose claim has been denied by a Medicare Administrative Contractor may present a claim through an administrative appeals process. 42 U.S.C. § 1395u(b)(3)(C); 42 U.S.C. § 1395ff(b) (incorporating by reference 42 U.S.C. § 405(b)); see also, 42 C.F.R. § 405.801 et seq. (). Once the administrative process is exhausted, judicial review of the Secretary's "final decision" is available as provided in 42 U.S.C. § 405(g) ().
10. Upon receipt of a claim for payment, the Medicare contractor issues a notice of "initial determination" indicating whether there is coverage, and, if so, the amount deemed owing. 42 U.S.C. § 1395ff(a)(1); 42 C.F.R. § 405.920. If the claimant is dissatisfied with the initial determination, a "redetermination" may be requested by the same contractor. 42 U.S.C. § 1395ff(a)(3); 42 C.F.R. § 405.940. Next, if the claimant is dissatisfied with the contractor's redetermination, a"reconsideration" may be requested by a "qualified independent contractor" ("QIC"). 42 U.S.C. § 1395ff(b)(1)(A) & (c); 42 C.F.R. § 405.960.
11. A still dissatisfied claimant may request a hearing, "as provided in [42 U.S.C. §] 405(b)," before an administrative law judge ("ALJ"). 42 U.S.C. § 1395ff(b)(1)(A), (E) & (d)(1); 42 C.F.R. § 405.1002. The participation of CMS and/or its contractors in an ALJ hearing is allowed if they elect to do so, but not required. 42 C.F.R. §§ 405.1010(a), 405.1012(a). The ALJ's decision, in turn, may be reviewed by the Appeals Council of the Departmental Appeals Board. 42 U.S.C. § 1395ff(d)(2); 42 C.F.R. § 405.1100. The Appeals Council and ALJs "are not bound by LCDs . . . or CMS program guidance, such as program memoranda and manual instructions, but will give substantial deference to these policies if they are applicable to a particular case." 42 C.F.R. § 405.1062(a).
12. As pertinent here, any Appeals Council or ALJ decision "to disregard such policy applies only to the specific claim being considered and does not have precedential effect." Id. § 405.1062(b). Moreover, neither the Appeals Council nor an ALJ have the authority to set aside or review an LCD in a Part B claims appeal; such actions may only be taken in accordance with 42 C.F.R. Part 426. Id. § 405.1062(c).
13. The claimant may seek judicial review, "as provided in [42 U.S.C. § ] 405(g)," of the final agency decision of the ALJ or the Appeals Council, as applicable. 42 U.S.C. § 1395ff(b)(1)(A), (E); 42 C.F.R. § 405.1136.
14. Plaintiff Gordian Medical, Inc. ("Gordian") is a Medicare-enrolled wound care supplier. Gordian primarily furnishes wound care supplies to residents of long term care facilities. Gordian submitted two sets of claims to Medicare for reimbursement of surgical dressings furnished to the Beneficiaries. The first claim was for surgical dressings furnished from January 2007 through July 2008. The second claim was for surgical dressings furnished from September 2007 throughJune 2008. The initial determinations were decided unfavorably for Gordian. NHIC, Corp., the Medicare contractor, reviewed the claims and issued unfavorable redeterminations. Upon appeal, RiverTrust Solutions, the Qualified Independent Contractor (QIC), reconsidered the claims and issued unfavorable decisions against Gordian. Gordian was held responsible for the non-covered charges, minus any deductibles or coinsurance.
15. Gordian timely requested ALJ Hearings on both sets of claims pursuant to 42 C.F.R. § 405.1002(a). The amounts in controversy meet the jurisdictional requirements for hearings at the Office of Medicare Hearings and Appeals (OMHA).
16. The first set of claims (No. 1-425778911) was heard on July 7, 2009, at the OMHA Midwestern Field Office in Cleveland, Ohio. This case was a consolidated matter involving nine hundred fifty-nine (959) separate appeals in which payment was denied in full or in part for surgical dressings provided on various dates in 2007 and 2008. Michael D. Watson, AMT's Vice President of Governmental Affairs, and Dr. Charles Gokoo, Chief Medical Officer for Gordian, participated at the hearing telephonically. Each was sworn according to law. Gordian proceeded without legal representation. Gordian received a ...
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