Midwest Family Clinic, Inc. v. Shalala

• Decision Date: 04 March 1998
• Docket Number: No. CIV. A. 97-40503.,CIV. A. 97-40503.
• Parties: MIDWEST FAMILY CLINIC INC. d/b/a Mobile Doctors and Mobile Doctors Management, L.L.C., Plaintiffs, v. Donna SHALALA, Secretary of Health and Human Services and Health Care Service Corporation, Defendants.
• Court: U.S. District Court — Eastern District of Michigan

998 F.Supp. 763

MIDWEST FAMILY CLINIC INC. d/b/a Mobile Doctors and Mobile Doctors Management, L.L.C., Plaintiffs, v. Donna SHALALA, Secretary of Health and Human Services and Health Care Service Corporation, Defendants.

No. CIV. A. 97-40503.

United States District Court, E.D. Michigan, Southern Division.

March 4, 1998.

Andrew B. Wachler, Phyllis A. Avery, Abby L. Pendleton, Wachler & Kopson, Detroit, MI, for Plaintiffs.

Peter O. Caplan, Asst. U.S. Atty., Detroit, MI, for Defendants.

MEMORANDUM OPINION AND ORDER DENYING PLAINTIFFS' MOTION FOR A PRELIMINARY INJUNCTION

GADOLA, District Judge.

On Thursday, December 18, 1997 Midwest Family Clinic, Inc. (d/b/a Mobile Doctors), a Michigan corporation, and Mobile Doctors Management, L.L.C., a Michigan limited liability corporation, filed a Verified Complaint for Declaratory Judgment, Mandamus and Injunctive Relief. Plaintiffs also filed a motion for a temporary restraining order ("TRO") and preliminary injunction on that same day.¹

On December 19, 1997, this court held a hearing on plaintiffs' motion for a TRO and preliminary injunction. At the hearing, plaintiffs' motion for a TRO was granted, and their motion for a preliminary injunction was taken under advisement.

Since the December 19, 1997 hearing, plaintiffs and defendants have filed supplemental briefs regarding plaintiffs' motion for a preliminary injunction. Upon a review of the supplemental briefs, the original pleadings, the arguments advanced at the hearing and all the relevant authorities, plaintiffs' motion for a preliminary injunction will be denied for the following reasons.

FACTS

Plaintiffs Midwest Family Clinic, Inc. (hereinafter "Midwest") and Mobile Doctors Management, L.L.C. (hereinafter "MDM") are providers of "Part B" medical services to home-bound Medicare patients residing in Michigan and Illinois.² On September 26, 1997, Defendant Health Care Service Corporation ("HCSC"), a Medicare Part B "carrier,"³ sent Midwest⁴ a one-page letter (hereinafter "suspension letter") notifying Midwest and MDM of a decision to suspend their Medicare payments in accordance with 42 C.F.R. 405.371(a)(1), 405.372(a)(4). In relevant part the suspension letter read as follows:

Medicare payments have been suspended because the Health Care Financing Administration (HCFA) has reliable information of Medicare fraud including information that Midwest has been unbundling diagnostic tests by submitting Medicare claims on two different dates of service when the service was rendered on one date, that Midwest has submitted widespread billings for medically unnecessary services, and that Midwest has submitted Medicare claims for clinic visits that did not occur.

The suspension letter also advised plaintiffs of their right to challenge the suspension of their Medicare payments by submitting, within 15 days of the date of the suspension letter, a statement as to why they believed the suspension should be removed (hereinafter "rebuttal").

On October 3, 1997, plaintiffs sent a letter to the HCSC in response to the HCSC's September 26, 1997 suspension letter. In their October 3, 1997 letter to HCSC, plaintiffs requested more information regarding the bases for the suspension. Plaintiffs asserted that without such additional information, they could not provide a meaningful rebuttal.

Before the HCSC responded to plaintiffs' October 3, 1997 letter, plaintiffs sent a rebuttal letter dated October 10, 1997 to the HCSC explaining why they thought their payments should not be suspended. For instance plaintiffs argued that Midwest and MDM were two separate entities and if Midwest did anything wrong, MDM should not be implicated. Plaintiffs also contended that the HCSC failed to properly grant deference to the physicians' determination of medical necessity. Moreover, plaintiffs argued that the suspension of payments should be lifted because less drastic measures could be implemented that would fully protect and secure HCSC's interest (e.g., the posting of security by plaintiffs or the hiring of an independent billing company approved by HCSC).

By letter dated October 27, 1997, the HCSC informed plaintiffs that it had considered their rebuttal and had determined that there was no basis for the HCSC to terminate the suspension. In other words, the HCSC decided to continue the suspension of plaintiffs' Medicare payment. In its October 27, 1997 correspondence, the HCSC also responded to plaintiffs' request for additional information. The HCSC provided plaintiffs with more details concerning the investigation into plaintiffs' alleged fraudulent practices which ultimately led to the decision to suspend plaintiffs' Medicare benefits and invited plaintiffs to send a supplemental rebuttal.⁵ In so doing, however, the HCSC made it patently clear that it believed the additional information it was providing was not required under the law.

On November 11, 1997, the plaintiffs sent a supplemental rebuttal stating that notwithstanding the additional information provided to them, they still could not provide any significant rebuttal. Plaintiffs insisted that they needed even more information to prepare any meaningful rebuttal.

To date, the HCSC has refused to provide plaintiffs any additional information and has decided to continue the suspension of plaintiffs' Medicare payments. Consequently, on December 18, 1997, plaintiffs instituted this lawsuit against the HCSC and Donna Shalala, the Secretary of Health and Human Services ("HHS").⁶ Plaintiffs argue that the suspension of their Medicare payments violates both their Fifth Amendment right to due process and their Fourth Amendment right to be free from unreasonable seizures. Plaintiffs also contend that the Secretary of HHS acted ultra vires in passing the various regulations which allow for the suspension of plaintiffs' Medicare payments. Moreover, plaintiffs bring a claim of trespass, conversion, and replevin, as well as a claim of mandamus.

ANALYSIS

The Regulations

Regulations issued December 2, 1996 authorize the suspension⁷ of Medicare payments when, inter alia, "the intermediary, or the carrier possesses reliable information that an overpayment or fraud or willful misrepresentation exists." 42 C.F.R. § 405.371(a). The preamble to the regulations states that "[t]he purpose of suspending payment is to verify whether, and how much, payment was actually due the provider for past claims and to ensure that, if a provider or supplier was overpaid, sufficient funds are available to recover the overpayment. These actions are clearly necessary to protect the Trust Funds from loss." 61 Fed.Reg. at 63742-63743.

A suspension is limited to 180 days. 42 C.F.R. § 405.372(d)(1).⁸ However, in cases of fraud and misrepresentation, a one-time only extension of 180 days is available if the carrier, intermediary, the Office of Inspector General ("OIG") or a law enforcement agency is unable to complete its examination of information or investigation.⁹ 42 C.F.R. § 405 .372(d)(2). Also, the HCFA, in very limited circumstances, may grant an additional extension of time if the Department of Justice submits a written request¹⁰ to HCFA that the suspension of payment be continued based on an on-going investigation and anticipated filing of criminal and/or civil actions.¹¹ 42 C.F.R. § 405.372(d)(3)(ii).

Once the HCFA, intermediary or carrier determines that a suspension of payments should be put into effect, it must notify the provider or supplier of its intent to suspend payments, along with the reasons for the suspension.¹² 42 C.F.R. § 405.372(a). The provider or supplier is then afforded the opportunity to prepare a rebuttal. 42 C.F.R. § 405.372(b)(1). If the provider or supplier chooses to send a rebuttal, the carrier or intermediary must, within 15 days of receipt of the same, consider it together with other pertinent evidence submitted and determine whether the facts justify termination of the suspension. 42 C.F.R. § 405.375(a).

The decision to suspend benefits is not a final determination under 42 U.S.C. 405(h) (hereinafter "§ 405(h)").¹³ Ergo, it is not appealable. 42 C.F.R. § 405.375(c). Neurological Associates — H. Hooshmand v. Bowen, 658 F.Supp. 468, 471 (S.D.Fla.1987). The suspension, however, "may culminate in an appealable determination [under 405(h) ... if the claims are subsequently denied," 61 Fed.Reg. at 63743, or if the provider is subsequently excluded from the Medicare program, Clarinda Home Health v. Shalala, 100 F.3d 526, 529 (8th Cir.1996).¹⁴

Preliminary Injunction

Plaintiffs seek a preliminary injunction prohibiting the suspension of their benefits until they are given what they consider to be "adequate notice" regarding the decision to suspend along with "a prompt and meaningful opportunity" to challenge the suspension. In deciding whether a preliminary injunction should issue, this court must engage in a balancing test of the following four factors: (1) whether plaintiffs will suffer irreparable injury absent the injunction; (2) whether issuance of the injunction would cause substantial harm to others; (3) whether the public interest would be served by issuance of the injunction; and (4) whether the movant has a "strong" likelihood of success on the merits. Fed.R.Civ.P. 65; Sandison v. Michigan High School Athletic Ass'n. Inc., 64 F.3d 1026, 1030 (6th Cir.1995) (setting forth the factors to be weighed in assessing whether a preliminary injunction should issue). The issuance of a preliminary injunction lies within the sound discretion of the district court. Id.; Charles Alan Wright, Arthur R. Miller, and Mary Kay Kane, 11 A Federal Practice and Procedure, § 2951 (1995).

A Preliminary Injunction Is Not Warranted Here

With the aforementioned four factors in mind, this court finds that a preliminary injunction is not warranted in this case. This court finds, for reasons set forth infra, that plaintiffs are not likely to succeed on the merits. Moreover, this court is of the...