Lutwin v. Thompson, 01-6269.

• Decision Date: 26 February 2004
• Docket Number: No. 01-6269.,01-6269.
• Citation: 361 F.3d 146
• Parties: Marcia LUTWIN, Linda Wierda, Jane Kozlowski, Margaret A. Walz, Roger Audette, Marion Morgan, by her next friend, Dorothy M. Hiltz, Julia M. Culver, by her next friend, Rev. Horace Mitchell, Bertha P. Chiplin, by her next friend, Alfred J. Chiplin, Sr., Plaintiffs-Appellants, Madalyn Rovner, Roland Cote, Florentina Calderon, by her next friend, Eva Moreno, Helen Bagwell, Maxine Mormor, Katherine Watts, Intervenors-Plaintiffs-Appellants, Ruth Healey, Plaintiff, v. Tommy G. THOMPSON, Secretary, United States Department of Health and Human Services, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

Page 146

361 F.3d 146

Marcia LUTWIN, Linda Wierda, Jane Kozlowski, Margaret A. Walz, Roger Audette, Marion Morgan, by her next friend, Dorothy M. Hiltz, Julia M. Culver, by her next friend, Rev. Horace Mitchell, Bertha P. Chiplin, by her next friend, Alfred J. Chiplin, Sr., Plaintiffs-Appellants Madalyn Rovner, Roland Cote, Florentina Calderon, by her next friend, Eva Moreno, Helen Bagwell, Maxine Mormor, Katherine Watts, Intervenors-Plaintiffs-Appellants Ruth Healey, Plaintiff, v. Tommy G. THOMPSON, Secretary, United States Department of Health and Human Services, Defendant-Appellee.

No. 01-6269.

United States Court of Appeals, Second Circuit.

Argued: October 22, 2002.

Decided: February 26, 2004.

Gill Deford, Center for Medicare Advocacy, Inc., Willimantic, CT (Judith Stein, Brad Plebani, and Pamela A. Meliso, Center for Medicare Advocacy, Inc., Willimantic, CT; Alfred J. Chiplin, Jr. and Vicki Gottlich, Center for Medicare Advocacy, Inc., Washington, DC; Sally Hart, Center for Medicare Advocacy, Inc., Tucson, AZ; Diane Paulson, Greater Boston Legal Services, Boston, MA; Edward C. King, National Senior Citizens Law Center, Washington, DC; Sarah Lock, AARP Foundation Litigation, Washington, DC; Lenore Gerard, San Francisco, CA, of counsel), for Plaintiffs-Appellants.

Jeffrey Clair (Barbara C. Biddle, of counsel; Robert D. McCallum, Jr., Assistant Attorney General, and John A. Danaher, III, United States Attorney for the District of Connecticut, on the brief), United States Department of Justice, Washington, D.C., for Defendant-Appellee.

Craig A. Landy, Landy & Seymour, New York, NY, for Amici Curiae Dr. Paul Edelen, Dr. Kenneth Dardick, Dr. Michelle Barry, Dr. Robert J. Bund, Dr. Walter T. McPhee, Dr. Michael Keenan, Dr. Christopher S. Sewell, and Dr. A. Goswami.

Before: WINTER and CABRANES, Circuit Judges, and JONES, District Judge.^*

Judge WINTER dissents in a separate opinion.

JOSÉ A. CABRANES, Circuit Judge.

Plaintiffs in this class action are homebound Medicare beneficiaries who rely on Medicare coverage for various home health services provided by private Home Health Agencies ("HHAs"). They seek declaratory and injunctive relief that would require the Secretary of the United States Department of Health and Human Services ("the Secretary" or "HHS") to compel HHAs to provide greater procedural protections before reducing or terminating home health services to Medicare beneficiaries.

The United States District Court for the District of Connecticut (Dominic J. Squatrito Judge) entered a declaratory judgment stating that Medicare beneficiaries have a "legal right" under the Medicare statute, and possibly under the Due Process Clause, to receive written notice from an HHA before that HHA reduces or terminates home health services pursuant to an adverse Medicare coverage determination. Healey v. Shalala, 2000 WL 303439 (D.Conn. Feb.11, 2000) ("Healey I") (report and recommendation of Magistrate Judge Thomas P. Smith, adopted by Judge Squatrito in an order entered on March 8, 2000).

In a subsequent ruling, the District Court granted summary judgment to the Secretary on all other claims. Healey v. Thompson, 186 F.Supp.2d 105 (D.Conn. 2001) ("Healey II") (report and recommendation of Magistrate Judge Smith, adopted by Judge Squatrito in an order entered September 24, 2001). The Court declined to order injunctive relief or to expand its declaratory judgment to require written notice when HHAs reduce or terminate home health services for reasons other than adverse Medicare judgments, such as a physician's failure to certify a care plan. Id. at 121. The Court also held that the Due Process Clause does not require pre-deprivation review by the Secretary of an HHA's adverse coverage determination. Id. at 128. Plaintiffs appeal the District Court's ruling in Healey II.

We hold that the Medicare statute requires HHAs to provide written notice to Medicare beneficiaries before reducing or terminating services, not only based on the HHAs' adverse Medicare coverage determinations, as the District Court held, but also for any other reason. Accordingly, the District Court's grant of summary judgment to the Secretary on the issue of notice is vacated, and the cause will be remanded to the District Court for consideration of such declaratory and injunctive relief as may be necessary to ensure that proper written notice is provided to Medicare beneficiaries.

In addition, we hold that the Due Process Clause does not require pre-deprivation review by the Secretary of an HHA's adverse coverage determination, and we affirm the District Court's grant of summary judgment to the Secretary on that claim.

Background

The facts and procedural history relevant to this case are recounted in detail in both the report and recommendation of Magistrate Judge Smith in Healey I, 2000 WL 303439, and the subsequent report and recommendation of the same Magistrate Judge in Healey II, 186 F.Supp.2d 105 — both of which were adopted without modification by Judge Squatrito. We set forth below only such facts as are necessary to the resolution of this appeal.

I. The Plaintiffs' Claims

Plaintiffs represent a class of similarly situated "elderly and disabled Medicare beneficiaries" who at one time received, or presently receive, home health care services provided by an HHA, but now face the reduction or termination, or the threat of reduction or termination, of their services. Compl. ¶¶ 1, 3. Plaintiffs filed suit on March 9, 1998 in the District Court against the Secretary seeking "meaningful notice and appeal rights when their home health benefits are reduced or terminated." Id.¹

At the time plaintiffs brought suit, the Medicare reimbursement process operated as follows: A private HHA that had provided services to a beneficiary would submit a Medicare reimbursement claim to the Health Care Financing Administration ("HCFA") (the agency within the Department of Health and Human Services that administers Medicare, now known as the Centers for Medicare and Medicaid Services or "CMS"), which would then reimburse the HHA for the covered services. Healey I, 2000 WL 303439, at *1 (citing Heckler v. Ringer, 466 U.S. 602, 605, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984)). Under this system, an HHA could prospectively decline to provide, or cease providing, services to a Medicare beneficiary when it concluded that HCFA would not cover those services. Because only an HHA could be reimbursed, and because reimbursement could only be sought for services already rendered, a Medicare beneficiary faced with an adverse coverage determination by an HHA could obtain review by the Secretary only if: (1) the beneficiary requested a "demand bill," which is "a claim [submitted by an HHA to HCFA] for services or items that the [HHA] believes are not covered but which the [HHA] must submit [to HCFA] at the request of the beneficiary," and (2) the beneficiary agreed to pay the HHA for the care provided if HCFA affirmed the adverse coverage determination. Id. at *3.

In their lawsuit, plaintiffs sought declaratory and injunctive relief to remedy four asserted violations of the Medicare statute and the Due Process Clause attributable to the Secretary: "(1) failing to provide written notice when home health agencies deny, reduce, or terminate home health services; (2) failing to provide a statement of the rationale for the change in benefits, a notice that the beneficiary may contest the change, and an explanation of how to use the appeal process; (3) neglecting to establish an effective demand bill procedure; and (4) refusing to provide for a pre-deprivation review process during the appeal." Healey II, 186 F.Supp.2d at 113.

II. Healey I

After the parties cross-moved for summary judgment on plaintiffs' claims, Magistrate Judge Thomas P. Smith recommended on February 11, 2000 that the District Court enter a declaratory judgment establishing that, under the Medicare statute:

[P]laintiffs have a legal right to a written: (1) pre-deprivation statement why the HHA believes Medicare may not or may no longer cover their services; (2) explanation of the circumstances in which a beneficiary has the right to have a demand bill submitted[;] and (3) disclosure of information regarding a patient's right to appeal.

Healey I, 2000 WL 303439, at *1 (citation and internal quotation marks omitted).

Because the Magistrate Judge's holding was based entirely on the Medicare statute, he held that it "may not be necessary for the district court to base its decision on a constitutional underpinning." Id. at *11. However, the Magistrate stated that "if so directed by the court" he would make further findings to facilitate a finding as to what procedural protections the Due Process Clause of the Constitution requires. Id.

Magistrate Judge Smith noted that the Secretary was "in the process of developing and implementing mandatory notice language which all HHAs [would] be required to use and which [would] provide beneficiaries with all the information that even plaintiffs insist is required," including notice of "the medical reason why the HHA believes Medicare may not or may no longer cover the services, an explanation of the circumstances in which a beneficiary has the right to have a demand bill submitted ... and information regarding a beneficiary's right to appeal." Id. at *10 (citations and internal quotation marks omitted). Accordingly, the Magistrate Judge recommended reserving for future proceedings the question of injunctive relief. Id. at *11.

The Magistrate Judge's recommendation was approved and adopted in full by Judge Squatrito in an order entered on March 8, 2000. Healey v. Shalala, 2000 WL 436618 (D.Conn. Mar. 8, 2000).

III. Intervening Changes to Medicare

On July 3, 2000, roughly four months after the District Court filed its initial ruling in Healey I, HCFA published a final rule effecting "fundamental changes" to home health services within the Medicare system that...