MJG Mgmt. Assocs. Inc. v. NHIC Corp.
| Decision Date | 09 May 2013 |
| Docket Number | Civil Action No. 12-11414-FDS |
| Parties | MJG MANAGEMENT ASSOCIATES INC., Plaintiff, v. NHIC CORP. and SAFEGUARD SERVICES, LLC, Defendants. |
| Court | U.S. District Court — District of Massachusetts |
MEMORANDUM AND ORDER ON MOTION TO DISMISS
AND MOTION FOR INJUNCTIVE RELIEF
This is a payment dispute between a home health agency that participates in the Medicare program and two Medicare contractors. Plaintiff MJG Management Associates, Inc., is a home health agency providing services under the Medicare Act. Defendants NHIC Corp. and Safeguard Services, LLC are Medicare contractors.1 On February 6, 2012, Safeguard notified MJG that it would be suspending Medicare payments to it based on information that MJG had engaged in fraud. MJG has sued for injunctive relief and more than $3.6 million in damages.
Defendants have moved to dismiss the complaint on two grounds. First, defendants contend that the Court does not have subject-matter jurisdiction because plaintiff has not exhausted its administrative remedies. Second, defendants contend that the complaint fails to state a claim upon which relief can be granted because Medicare contractors are immune fromtort liability for acts arising out of the performance of their official duties. For the reasons set forth below, the motion to dismiss will be granted.
Medicare is a federal program, established by the Medicare Act, that is designed to provide health insurance coverage to seniors and certain disabled individuals. 42 U.S.C. §§ 1395 et seq. Home health care services are covered under both Parts A and B of Medicare. 42 U.S.C. §§ 1395d(a)(3) and 1395k(a)(2)(A). Those services are available only to beneficiaries who meet certain conditions set forth in the relevant statutes and regulations. Providers of services to qualified beneficiaries can receive reimbursement from the program. To receive payment, a provider must enter into an agreement with the Secretary of Health and Human Services, and must comply with various statutory and regulatory requirements. Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1, 6 (2000).
The Department of Health and Human Services administers the Medicare program, and has delegated that function to the Center for Medicare and Medicaid Services ("CMS"). Citadel Healthcare Servs. v. Sebelius, 2010 U.S. Dist. LEXIS 129960, at *5 (N.D. Tex. Dec. 8, 2010). By statute, CMS is authorized to enter into contracts with other entities to perform certain administrative functions. In particular, CMS has the authority to contract with Medicare Administrative Contractors to handle responsibilities involving payment, provider services, and services related to individual benefits. 42 U.S.C. §1395kk-1(a)(1), (a)(4). CMS also has the authority to contract with entities—called "Program Safeguard Contractors"—to preserve the integrity of Medicare by performing tasks such as reviewing the activities of providers, auditingcost reports, and making determinations as to whether payment should or should not be made. 42 U.S.C. §1395ddd(a), (b)(1)-(4).
Payments to a provider may be suspended if CMS or a CMS-authorized Medicare contractor possesses reliable information of overpayment, incorrect payment, or fraud. 42 C.F.R. § 405.371(a)(1)-(2). The preamble to the regulations governing suspension of provider payments states that 61 Fed. Reg. 63740, 63742-43 (Dec. 2, 1996).
A suspension is a temporary action. It is typically limited to 180 days, although it may be extended if the carrier, the Office of the Inspector General, or a law enforcement agency is unable to complete an investigation in that time. 42 C.F.R. § 405.372(d)(1). In cases of suspected fraud, CMS must determine, in consultation with the Office of the Inspector General (and the Department of Justice, as appropriate), whether to impose the suspension, and whether to provide prior notice of the suspension. 42 C.F.R. § 405.372(a)(4)(I). Where prior notice is not required, CMS or the Medicare contractor must give the provider an opportunity to submit a rebuttal statement indicating why the suspension should be removed. 42 C.F.R. § 405.372(b)(2). If the provider responds, CMS or the contractor must consider the contents of the rebuttal statement within 15 days of its receipt to determine whether the facts justify the suspension. 42 C.F.R. § 405.375(a). The Medicare contractor must then send written notice to the provider of the decision by CMS on whether to continue the suspension. 42 C.F.R. § 405.375(b).
The decision to suspend benefits is not a final determination under 42 U.S.C. § 405(h), and thus is not appealable. See, e.g., Midwest Family Clinic, Inc. v. Shalala, 998 F. Supp. 763, 767 (E.D. Mich. 1998); 42 C.F.R. 405.375(c).2 The suspension "may culminate in an appealable determination . . . if the claims are subsequently denied," 61 Fed. Reg. 63740, 63743 (Dec. 2, 1996), or if the provider is subsequently excluded from the Medicare program. See, e.g., Clarinda Home Health v. Shalala, 100 F.3d 526, 530 (8th Cir. 1996).3
Unless otherwise specified, all facts are set forth as stated in the complaint.
MJG Management Associates, Inc., is a Medicare-certified provider of home health services. Over the past seven years, MJG has worked with approximately 1,000 patients. (Compl. ¶ 8). MJG provides services according to a plan of care established by a physician, and later submits bills for reimbursement. (Compl. ¶¶ 11-12). According to the complaint, it has submitted approximately $3.6 million in bills for services that have not been paid. (Compl. ¶ 14).
Defendants NHIC Corp. and Safeguard Services, LLC are both Medicare contractors, responsible for various administrative functions delegated by CMS. NHIC functions as a Medicare Administrative Contractor, and Safeguard functions as a Program Safeguard Contractor.
At some point between 2006 and 2011, defendants became suspicious about payments being requested by MJG. On November 30, 2011, federal agents obtained a warrant to search MJG's offices. (Compl. ¶ 24).4 On December 6, federal agents executed the warrant and seized records, hard drives, and other items from MJG's business address. (Compl. ¶ 26). On the same date, officials also seized records from the home of Michael Galatis. (Compl. ¶ 27).5 Officials have subsequently served additional administrative subpoenas on MJG. (Compl. ¶ 28).
In early February 2012, SafeGuard sent a letter to MJG indicating that it had made a determination that payments to MJG would be suspended because of a credible allegation of fraudulent conduct. (Compl. ¶ 17). MJG was given an opportunity to, and did, respond to that letter. Following the temporary suspension of payments, nearly all of MJG's requests for payments were ultimately permanently denied. (Compl. ¶¶ 46, 52). Nothing in the record indicates that MJG has made any effort to institute an administrative appeal of that determination.
The complaint alleges that, at the time payments were suspended, CMS had not made any independent determination that payments should be suspended. The complaint also alleges that Safeguard's letter of suspension did not identify any particular instance of misconduct, making the allegations impossible to refute. Accordingly, MJG contends that the suspension of payments was fraudulent and in violation of 42 C.F.R. 405.372(a)(4).
Plaintiff filed a complaint in the present action on August 1, 2012. On September 26, plaintiff also filed a motion for injunctive relief. Among other things, plaintiff asks the Court to direct NHIC to issue payment in the amount of $3.6 million, or in the alternative, to identify the fraudulent activity that justifies withholding payment. Plaintiff also seeks recovery of all confiscated files and punitive damages.
Federal courts are courts of limited jurisdiction. They possess only those powers granted by either the Constitution or statute, and cannot adjudicate claims absent such power. See, e.g., Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Accordingly, the existence of subject-matter jurisdiction is never presumed. Fafel v. DiPaola, 399 F.3d 403, 410 (1st Cir. 2005). Rather, "the party invoking the jurisdiction of a federal court carries the burden of proving its existence." Murphy v. United States, 45 F.3d 520, 522 (1st Cir. 1995).
In ruling on a motion brought under Fed. R. Civ. P. 12(b)(1), the court must credit the plaintiff's well-pleaded factual allegations and draw all reasonable inferences in its favor. Merlonghi v. United States, 620 F.3d 50, 54 (1st Cir. 2010). The court may also consider other evidence, including depositions and exhibits submitted by either party. Id.
On a motion to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6), the court "must assume the truth of all well-plead[ed] facts and give the plaintiff the benefit of all reasonable inferences therefrom." Ruiz v. Bally Total Fitness Holding Corp., 496 F.3d 1, 5 (1stCir. 2007) (citing Rogan v. Menino, 175 F.3d 75, 77 (1st Cir. 1999)). To survive a motion to dismiss, the complaint must state a claim that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). That is, "[f]actual allegations must be enough to raise a right to relief above the speculative level, . . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. at 555 (citations omitted). "The plausibility standard is not akin...
To continue reading
Request your trial