Matthews v. Leavitt

• Decision Date: 20 June 2006
• Docket Number: Docket No. 05-4853-cv.
• Citation: 452 F.3d 145
• Parties: William F. MATTHEWS, Estate of William F. Matthews Sr., Plaintiffs-Appellants, v. Michael O. LEAVITT, Secretary of the Department of Health and Human Services and Excellus, Inc., a Medicare Plus Choice Organization doing business as Senior Choice, Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

452 F.3d 145

William F. MATTHEWS, Estate of William F. Matthews Sr., Plaintiffs-Appellants, v. Michael O. LEAVITT, Secretary of the Department of Health and Human Services and Excellus, Inc., a Medicare Plus Choice Organization doing business as Senior Choice, Defendants-Appellees.

Docket No. 05-4853-cv.

United States Court of Appeals, Second Circuit.

Argued: May 11, 2006.

Decided: June 20, 2006.

William W. Berry, Legal Services for the Elderly, Disabled or Disadvantaged of Western New York, Inc., Buffalo, NY, for Plaintiffs-Appellants.

Susan M. Bozinko, Assistant Regional Counsel, United States Department of Health and Human Services, Office of the General Counsel—Region II, New York, N.Y. (Kathleen M. Mehltretter, Acting United States Attorney, Jane B. Wolfe, Assistant United States Attorney, United States Attorney's Office for the Western District of New York, Buffalo, NY; Paula M. Stannard, Acting General Counsel, Joel Lerner, Chief Counsel—Region II, Rachel Park, Assistant Regional Counsel, United States Department of Health and Human Services, Office of the General Counsel— Region II, New York, NY, on the brief), for Defendant-Appellee Michael O. Leavitt.

Cheryl Smith Fisher, Magavern, Magavern & Grimm, L.L.P., Buffalo, NY, for Defendant-Appellee Excellus, Inc.

Before WINTER, CABRANES and RAGGI, Circuit Judges.

JOSÉ A. CABRANES, Circuit Judge.

We consider here whether an Administrative Law Judge ("ALJ") adjudicating a dispute over entitlement to benefits pursuant to the terms of an agreement between an enrollee and a Medicare + Choice provider under Medicare Part C¹ has statutory authority to hear a state law contract claim for damages independent of the ALJ's determination of the enrollee's entitlement to benefits pursuant to the agreement. We hold that an ALJ lacks statutory authority to entertain such a claim, and that the ALJ here properly declined to hear Matthews's claim for breach of contract damages. Accordingly, we affirm the judgment of the United States District Court for the Western District of New York (John T. Curtin, Judge) awarding the Secretary of Health and Human Services (the "Secretary") judgment on the pleadings pursuant to Federal Rule of Civil Procedure 56(c) and dismissing plaintiffs' claims.

We recount only those facts of the case that are necessary for resolution of this appeal.

William F. Matthews, Sr., now deceased, was a Medicare beneficiary enrolled in a Medicare + Choice plan called Senior Choice, which was administered by Excellus Health Plan, Inc.² During the period between October 1, 1997 and March 23, 1998, Matthews was hospitalized on three separate occasions, each of which was followed by a stay at a skilled nursing facility ("SNF"). See 42 C.F.R. § 409.31 (defining skilled nursing and skilled rehabilitation services). The first instance of hospitalization occurred on September 25, 1997, when Matthews, who was suffering from septic arthritis with osteomyelitis, was admitted to Buffalo General Hospital. He was discharged on October 1, 1997, after having had a toe removed, and transferred to the Hamburg Health Care SNF, where he received treatment until October 13, 1997. The second instance of hospitalization occurred on October 31, 1997, when Matthews was again admitted to Buffalo General Hospital, this time with dehydration and gastroenteritis. On November 13, 1997, he was discharged and transferred to Garden Gate Manor SNF.

On December 9, 1997, while at Garden Gate Manor SNF, Matthews was informed by Senior Choice that it had made an "organization determination"³ that as of December 16, 1997, his stay at Garden Gate Manor SNF would no longer be covered because he would soon meet his rehabilitation goals. Under the applicable regulations, such an organization determination regarding entitlement to benefits was binding unless reconsideration was sought. See 42 C.F.R. § 417.612 (1998) (repealed) (organization determinations binding unless reconsideration sought); 42 C.F.R. § 422.576 (2006) (currently applicable analogous provision); see also 42 C.F.R. § 417.614 (1998) (repealed) (providing right to seek reconsideration of organization determinations); 42 C.F.R. § 422.578 (2006) (currently applicable analogous provision).⁴

On December 12, 1997, Matthews's son sought expedited reconsideration, see 42 C.F.R. § 417.617(c)(2) (1998) (repealed) (providing for expedited reconsideration); 42 C.F.R. § 422.566(a) (2006) (currently applicable analogous provision), with respect to Matthews's entitlement to SNF services, and Senior Choice denied the request. Matthews's request for reconsideration was instead processed in the ordinary course, and on January 26, 1998, Senior Choice affirmed its decision to deny coverage.

The regulation that governed reconsideration of organization determinations also provided for mandatory review by the Health Care Financing Administration ("HCFA"), see note 3 ante, of an adverse organization determination that had been upheld on reconsideration. See 42 C.F.R. § 417.620(b) (1998) (repealed); see also 42 C.F.R. § 422.592(a) (2006) (currently applicable provision that mandates review by "an independent, outside entity that contracts with [Centers for Medicare and Medicaid Services⁵]"). After Senior Choice denied Matthews's claim on reconsideration, his file was forwarded to the Center for Health Dispute Resolution ("CHDR"), an independent, third-party entity under contract with the HCFA to provide automatic review on behalf of the HCFA. By letter dated April 9, 1998, the CHDR notified Matthews that it had reviewed his case file and that it had upheld the decision of Senior Choice to terminate Matthews's coverage for his stay at Garden Gate Manor SNF.

After an enrollee's case was reviewed by the HCFA or its designee, he was entitled to a hearing before an ALJ if he remained aggrieved and there was a sufficient amount in controversy. See 42 C.F.R. § 417.630 (1998) (repealed); 42 C.F.R. § 422.600(a) (2006) (currently applicable analogous provision). On June 10, 1998, Matthews wrote to CHDR requesting a hearing before an ALJ. There is no indication in the record that a hearing before an ALJ was ever held in the wake of Matthews's request or that any further action was taken by the parties with respect to that request.

Matthews's third hospitalization occurred when he fell at his home, the day after being discharged from Garden Gate Manor SNF. He was taken to the Lakeshore Hospital emergency room for evaluation and then transferred to Buffalo General Hospital to be treated for a fractured wrist. On December 19, 1997, Matthews was released and transferred to a third SNF—Gardens at Manhattan—where he received physical and occupational therapy. On February 11, 1998, Senior Choice sent Matthews a letter, informing him that pursuant to the terms of the Senior Choice Subscriber Agreement (the "Subscriber Agreement"), which capped his SNF coverage at 100 days per "spell of illness,"⁶ he would exhaust that coverage as of February 13, 1998. Matthews was not discharged until March 23, 1998, by which time he had spent 38 days in the SNF following the exhaustion of his coverage.

Matthews requested reconsideration of Senior Choice's determination that his SNF coverage was exhausted. He conceded that he had spent the covered 100 days in SNFs during one spell of illness, but claimed that he was entitled to additional coverage because "Senior Choice . . . forced Mr. Matthews to return home [from his earlier stay at the Garden Gate Manor SNF] before he was physically ready" on December 15, 1997, which had, according to Matthews, caused him to fall at his home and to require the third period of hospitalization and SNF care. Letter of Damon M. Gruber to Rebecca Ritchie, March 17, 1998, at 2.

Senior Choice upheld its denial of coverage on April 21, 1998. CHDR reviewed Senior Choice's decision and affirmed the denial of coverage on June 15, 1998. On July 1, 1998, Matthews sought a hearing before an ALJ, claiming that a "premature discharge from Garden Gate Nursing Home . . . directly resulted in a fall and fractured wrist, requiring readmission to a hospital on December 16, and nursing home on December 19, prolonging Mr. Matthews's recuperation and forcing him to exhaust his 100 day limitation of coverage, which, but for the financially-motivated discharge, would not have happened." Letter of William W. Berry to the CHDR, July 1, 1998, at 1.

ALJ Verner Love of the Social Security Administration Office of Hearings and Appeals⁷ held a hearing on November 23, 1999. The ALJ repeatedly noted that Matthews seemed to be asserting a medical malpractice claim and that a hearing before an ALJ was not an appropriate forum in which to advance such a claim. Matthews's counsel agreed that he could not pursue a malpractice claim before the ALJ, but argued that even though Senior Choice had satisfied the plain terms of its Subscriber Agreement by providing the full 100 days of SNF coverage required, that Senior Choice nevertheless breached its Subscriber Agreement because it improperly cut off Matthews's coverage when he had been at the Garden Gate Manor SNF, thereby causing him to be prematurely released, to fall, to be reinjured and to require additional SNF care.

On April 20, 2000, the ALJ issued a decision in which he considered and rejected Matthew's argument that Senior Choice should be held responsible for the cost of the additional 38 days that Matthews had spent at Gardens at Manhattan SNF because Senior Choice had allegedly provoked Matthews's prior, premature discharge from the Garden Gate Manor SNF. The ALJ concluded that Senior Choice had satisfied its obligations to Matthews under the requirements of the Medicare + Choice Program and the Subscriber Agreement. The ALJ also noted that

[n]either the further issue of careless negligence or unauthorized action on the part of Senior Choice in discharging the beneficiary from the Garden Gate Manor on December...