Odell v. Azar

• Citation: 344 F.Supp.3d 1192
• Decision Date: 26 September 2018
• Docket Number: Case No. 2:15-cv-1793-RFB-GWF
• Parties: Robert H. ODELL, Jr., et al., Plaintiffs, v. Alex M. AZAR II, Secretary of Health and Human Services, et al., Defendants.
• Court: U.S. District Court — District of Nevada

344 F.Supp.3d 1192

Robert H. ODELL, Jr., et al., Plaintiffs,

v.Alex M. AZAR II, Secretary of Health and Human Services, et al., Defendants.

Case No. 2:15-cv-1793-RFB-GWF

United States District Court, D. Nevada.

Signed September 26, 2018

George K. Brew, Pro Hac Vice, Law Office of George Brew, PLLC, Jacksonville, FL, Robert D. Rourke, Rourke Law Firm, Las Vegas, NV, for Plaintiffs.

Brett Bierer, U.S. Dept. of Health and Human Services, OGC U.S. Department of Health & Human Services, Baltimore, MD, Roger W. Wenthe, U.S. Attorney's Office, Las Vegas, NV, for Defendants.

ORDER

Motion to Dismiss (ECF No. 103) & Motion for Preliminary Injunction (ECF No. 104)

RICHARD F. BOULWARE, II, UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

Before the Court is Defendant's Motion to Dismiss (ECF No. 103) and Plaintiff's Motion for Preliminary Injunction (ECF No. 104). For the reasons stated below, Defendant's Motion to Dismiss is denied and Plaintiff's Motion for Preliminary Injunction is granted.

II. PROCEDURAL BACKGROUND

Plaintiff filed the original Complaint on September 18, 2015, seeking injunctive relief for violations of procedural due process, the Administrative Procedure Act ("APA"), and the Medicare Act, stemming from an alleged unwritten policy to improperly deny Medicare coverage for certain forms of treatment. ECF No. 1. At a hearing on August 4, 2016, the Court granted Defendant's Motion to Dismiss without prejudice and gave Plaintiff 30 days to amend the Complaint. Plaintiff filed an Amended Verified Complaint on September 9, 2016, in which he clarified that he does not seek to recuperate previous claim denials on behalf of individual patients, but rather seeks declaratory and injunctive relief. ECF No. 57. Defendant moved to dismiss the Amended Complaint and the Court held a hearing on August 17, 2017, in which it denied the Motion to Dismiss without prejudice and allowed Plaintiff limited jurisdictional discovery to provide evidence of the alleged "unwritten rule." ECF No. 79. Defendant filed the instant Motion to Dismiss and Plaintiff filed the instant Motion for Preliminary Injunction on February 16, 2018. ECF Nos. 103, 104. The Court held a hearing on these motions on July 17, 2018, and took the matter under submission.

III. FACTUAL BACKGROUND

This case entails a relatively complex factual background, which the Court summarizes based on the pleadings and motions.

a. Statutory and Regulatory Background

i. Medicare Coverage Determinations

Title XVIII of the Social Security Act of 1965 established Medicare, a federal health insurance program for the elderly and disabled. 42 U.S.C. § 1395 et seq. Medicare covers certain inpatient and outpatient treatments for eligible participants. Under the Medicare statute, no payment may be made for expenses incurred for items or services which "are not 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(a)(1)(A). Congress delegated discretion over coverage decisions to the Secretary of Health and Human Services ("the Secretary"). There is an intricate administrative infrastructure in place to determine whether services are reasonable and necessary, and thus covered by Medicare.

Congress requires the Secretary to enter into contracts with private contractors to administer the Medicare statute. 42 U.S.C. §§ 1395u ; 1395kk-1. The Center for Medicare and Medicaid Services ("CMS") is the federal agency that administers the Medicare statute by entering into contracts with Medicare Administrative Contractors ("MACs"). 42 C.F.R. § 421.200. Each MAC is responsible for administering the Medicare program in a discrete geographical location. Within this administrative apparatus, there are four ways that the Secretary can determine whether a given service is covered by Medicare: (1) the Secretary can promulgate a regulation, 42 U.S.C. § 1395hh ; (2) the Secretary can issue a National Coverage Determination ("NCD"), which is binding on all Medicare contractors and adjudicators and determines coverage on a nationwide basis, 42 U.S.C. § 1395ff(f)(1)(B) ; (3) a MAC can issue a Local Coverage Determination ("LCD"), which identifies items or services that are covered or not covered under particular circumstances and mandates automated initial determinations in those cases, 42 U.S.C. § 1395ff(f)(2)(B) ; (4) if no regulation, NCD, or LCD applies, the MAC will determine coverage on a case-by-case basis.

An LCD is defined in the Medicare statute as "a determination by [a contractor] ... respecting whether or not a particular item or service is covered on an intermediary- or carrier-wide basis under such parts, in accordance with [ 42 USCS § 1395y(a)(1)(A) ]." 42 U.S.C. § 1395ff(f)(2)(B). 42 U.S.C. § 1395y(a)(1)(A) is the "reasonable and necessary" standard described above, indicating that LCDs established by MACs must comply with this standard. Only the MAC that created the LCD is bound by it and LCDs "are only binding in the initial adjudication and during the preliminary appeals stages. They do not bind [Administrative Law Judges] or the federal courts." Erringer v. Thompson, 371 F.3d 625, 634 & n.10 (9th Cir. 2004). An aggrieved party can submit a complaint to challenge an LCD, which must then be reviewed by an Administrative Law Judge ("ALJ") who "shall review the record and shall permit discovery and the taking of evidence to evaluate the reasonableness of the determination." 42 U.S.C. § 1395ff(f)(2). Only those entitled to benefits under the Medicare statute are considered "aggrieved parties" who can challenge an LCD. 42 U.S.C. § 1395ff(f)(5). Providers of services to Medicare beneficiaries are not aggrieved parties and cannot challenge an LCD. Id.

Starting in 2006, Congress directed the Secretary to enter into contracts with Recovery Audit Contractors ("RACs") to identify underpayments and overpayments of Medicare benefits and recoup overpayments. 42 U.S.C. § 1395ddd(h). RACs are paid on a contingency basis. Id. RACs can obtain overpayments by withholding future Medicare payments to the provider until the amount owed is paid off, a process known as recoupment.

ii. Administrative Appeals Process

There is a multi-step administrative appeals process in place, should a claimant believe that coverage of a service was improperly denied. A supplier, defined as "a physician or other practitioner, a facility, or other entity... that furnishes items or services under this title," 42 U.S.C. § 1395x(d), may file a claim if they have accepted assignment for items or services furnished to a beneficiary.¹

42 C.F.R. § 405.906(a)(2). A claimant first submits a claim to their MAC for an initial determination. 42 U.S.C. § 1395ff(a) ; 42 C.F.R. § 405.920. If the claimant is dissatisfied with the initial determination, they may seek redetermination by the same MAC. Id. § 1395ff(a)(3) ; 42 C.F.R. § 405.940. If the claimant is still dissatisfied, they may seek reconsideration by a Qualified Independent Contractor ("QIC"). Id. §§ 1395ff(b) and (c) ; 42 C.F.R. § 405.960. If the claim is denied on reconsideration, the claimant may seek a hearing before an ALJ, in which they can testify and present evidence. Id. § 1395ff(d)(1). Finally, the claimant can appeal the ALJ's decision to the Medicare Appeals Council ("the Council"), which largely bases its decision on the evidence in the record from the proceedings before the ALJ. Id. § 1395ff(d)(2) ; 42 C.F.R. §§ 405.1100, 405.1122. The Council's decision (or the ALJ's decision, if not reviewed by the Council) represents the final decision of the Secretary. 42 C.F.R. §§ 405.1130, 405.1132. Once the Council either issues a decision or fails to issue a decision within the applicable time period, an appellant may file an action in federal district court within 60 days. Id.

As discussed above, only the MAC that promulgated an LCD is bound by it. However, the QIC, ALJ, and Council will give "substantial deference" to an LCD if it is applicable to a particular case. 42 C.F.R. § 405.1062(a). If an ALJ or the Council declines to follow an LCD, they must explain why. Id. § 405.1062(b). The ALJ or Council's decision to disregard an LCD only applies to the specific claim being considered and has no precedential effect. Id. An ALJ or the Council may not set aside or review the validity of an LCD for purposes of a claim appeal. Id. § 405.1062(c). The only way to review or set aside an LCD is through the process described in 42 U.S.C. § 1395ff(f)(2), in which an "aggrieved party" (not a supplier) may submit a complaint and have an ALJ review an LCD.

b. Factual Findings

Having described the regulatory scheme in which this case takes place, the Court makes the following factual findings regarding Plaintiff's claims.²

i. Dr. Odell's Treatment

Plaintiff Odell is a physician who routinely provides a treatment ("the treatment") for a condition known as neurological ischemia, which causes pain, numbness, and loss of functionality in the lower extremities. Dr. Odell has successfully used the treatment on hundreds of patients over the past several years to restore functionality to their lower extremities. The treatment consists of nerve blocks for pain combined with electrical stimulation. It is routine and applied in a similar fashion to each patient who receives it.

ii. The "Unwritten Rule"

Dr. Odell alleges that Nevada's MAC is applying a default policy or "unwritten rule," by which Medicare coverage is automatically denied for his treatment. Noridian is the local MAC that provides Medicare services in Nevada. Noridian has created two LCDs that are relevant to this case: "LCD L28271 Injections – Tendons, Ligament, Ganglion Cyst, Tunnel Syndromes and Morton's Neuroma" and "LCD L28240 Blocks and Destruction of Somatic and Sympathetic Nerves." As the name suggests, LCD L28271 describes which services are presumptively necessary and reasonable – or not – in various circumstances involving injections for problems...