People ex rel. San Diego Comprehensive Pain Mgmt. Ctr. v. Eisengrein

• Docket Number: 22-cv-1648-BAS (WVG)
• Decision Date: 02 June 2023
• Parties: PEOPLE OF THE STATE OF CALIFORNIA ex rel. SAN DIEGO COMPREHENSIVE PAIN MANAGEMENT CENTER, INC.; PACIFIC SURGICAL INSTITUTE OF PAIN MANAGEMENT, Plaintiffs, v. JAYSEN EISENGREIN; SANDRA LOVE, Defendants.
• Court: U.S. District Court — Southern District of California

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PEOPLE OF THE STATE OF CALIFORNIA ex rel. SAN DIEGO COMPREHENSIVE PAIN MANAGEMENT CENTER, INC.; PACIFIC SURGICAL INSTITUTE OF PAIN MANAGEMENT, Plaintiffs, v. JAYSEN EISENGREIN; SANDRA LOVE, Defendants.

No. 22-cv-1648-BAS (WVG)

United States District Court, S.D. California

June 2, 2023

ORDER:

(1) DENYING PLAINTIFFS' MOTION TO REMAND (ECF No 7);

(2) GRANTING DEFENDANTS' MOTION TO DISMISS (ECF No. 8);

(3) TERMINATING AS MOOT THE GOVERNMENT'S MOTION TO INTERVENE AND STAY (ECF No. 9); AND

(4) TERMINATING AS MOOT MOTION TO WITHDRAW AS COUNSEL (ECF No. 19)

Cynthia Bashant, United States District Judge

Plaintiffs San Diego Comprehensive Pain Management Center, Inc. and Pacific Surgical Institute of Pain Management, Inc. are a medical practice and surgery center that treat patients with chronic pain. This case is the second action involving a suspension of their Medicare payments. Previously, Plaintiffs sued the Secretary of the Department of Health and Human Services and a Medicare contractor-Qlarant Integrity Solutions, LLC-to challenge the suspension. This Court dismissed Plaintiffs' action for lack of subject matter jurisdiction, reasoning Plaintiffs failed to exhaust their administrative remedies under the Medicare Act.

Several months later, Plaintiffs filed this state court action against two employees of the Medicare contractor-Defendants Sandra Love and Jaysen Eisengrein. Plaintiffs assert state law claims arising from Defendants' alleged role in suspending the Medicare payments. Defendant Love removed the case under the federal officer removal statute. Love alleges she can invoke federal officer removal because she is being sued for exercising her Medicare administration duties.

Now before the Court are two competing motions. First, Plaintiffs move to remand, arguing removal was improper. Second, Defendants move to dismiss on several grounds, including lack of subject matter jurisdiction. For the following reasons, the Court denies Plaintiffs' Motion to Remand, grants Defendants' Motion to Dismiss, and terminates as moot the other pending motions.

BACKGROUND

I. The Medicare Act

Title XVIII of the Social Security Act, commonly known as the Medicare Act, establishes a federally subsidized health insurance program covering the elderly and disabled. 42 U.S.C. §§ 1395-1395lll. The Department of Health and Human Services (“HHS”) administers Medicare. E.g., Aylward v. SelectHealth, Inc., 35 F.4th 673, 675 (9th Cir. 2022). The Secretary of HHS delegates this responsibility to the Centers for Medicare and Medicaid Services (“CMS”)-an agency within HHS. Id.

Under Parts A and B of Medicare, the Government “pays health care providers on a fee-for-service basis at rates approved by” CMS. Glob. Rescue Jets, LLC v. Kaiser Found. Health Plan, Inc., 30 F.4th 905, 909 (9th Cir. 2022). Medicare, however, “pays only for services that are ‘reasonable and necessary.'” Odell v. U.S. Dep't of Health & Hum. Servs., 995 F.3d 718, 720 (9th Cir. 2021) (quoting 42 U.S.C. § 1395y(a)(1)(A)). Therefore, providers first submit claims for reimbursement for services, the Government reviews those claims, and then the Government makes appropriate payments to the providers. 42 C.F.R. § 405.920.

A. Administrative Contractors

From its inception, Medicare has relied on administrative contractors. Nat'l Gov't Servs., Inc. v. United States, 923 F.3d 977, 979 (Fed. Cir. 2019). CMS is authorized “to facilitate the evaluation and reimbursement of claims for covered medical treatment” by contracting with private entities, which then review and “process those claims on the Government's behalf.” United States ex rel. Hartpence v. Kinetic Concepts, Inc., 44 F.4th 838, 840 (9th Cir. 2022). This type of contractor is known as a Medicare Administrative Contractor. 42 U.S.C. § 1395kk-1(a)(1). Disputes arising under the Medicare Act often start with a contractor's decision to deny or pay a lower reimbursement amount for a provider's claim. E.g., Odell, 995 F.3d at 720; Silverado Hospice, Inc. v. Becerra, 42 F.4th 1112, 1117 (9th Cir. 2022).

Beyond enlisting contractors for claims processing, CMS uses outside entities for the congressionally mandated “Medicare Integrity Program.” 42 U.S.C. § 1395ddd. One of these entities is labeled a Unified Program Integrity Contractor (“UPIC”). Angel's Touch Inc. v. Becerra, No. CV-21-08026-PCT-MTL, 2021 WL 2138766, at *1 (D. Ariz. May 26, 2021); Hollywood Home Health Servs., Inc. v. Qlarant Quality Sols., Inc., No. CV 19-6817-DMG (ASX), 2020 WL 3964792, at *1 (C.D. Cal. Feb. 27, 2020). A UPIC performs activities that “promote the integrity of” Medicare, including auditing cost reports, reviewing service providers for fraud, and recovering “payments that should not have been made.” 42 U.S.C. § 1395ddd(a), (b).

B. Suspension of Medicare Payments

Medicare contractors also assist CMS when it suspends a healthcare provider's Medicare payments. 42 C.F.R. § 405.372. CMS can suspend payments “in whole or in part” when CMS determines that “a credible allegation of fraud exists against a provider or supplier.” Id. § 405.371(a)(2). Moreover, CMS may suspend payments without notice where there is a “belief that giving prior notice would hinder the possibility of recovering” Medicare funds. Id. § 405.372(a)(3). In enacting a suspension, CMS:

(i) In consultation with [the HHS Office of Inspector General] and, as appropriate, the Department of Justice, determines whether to impose the suspension and if prior notice is appropriate;

(ii) Directs the Medicare contractor as to the timing and content of the notification to the provider or supplier; and

(iii) Is the real party in interest and is responsible for the decision.

Id. § 405.372.

With the Medicare contractor's help, CMS must give the provider an opportunity to submit a rebuttal statement in writing as to why the suspension should be removed. 42 C.F.R. § 405.372(a)(3), (b)(2). Within fifteen days of receiving a rebuttal, CMS determines whether the suspension should stay in effect. Id. § 405.375(a). That conclusion is not “an initial determination and is not appealable” within the Medicare Act's administrative process. Id. § 405.375(c); see also Maka Hospice v. Azar, No. CV 19-7065 DDP, 2020 WL 4284972, at *2 (C.D. Cal. July 24, 2020) (“The [suspension of Medicare payments] is nothing more than a temporary measure necessary to maintain the status quo while the necessary facts are gathered and evaluated.” (quoting Clarinda Home Health v. Shalala, 100 F.3d 526, 530 (8th Cir. 1996))). Instead, after suspending payments, CMS must reevaluate in 180 days whether good cause exists to continue the suspension. 42 C.F.R § 405.371(b). A fraud-based suspension may be further continued if the Department of Justice is pursuing a civil or criminal action. Id. § 405.371(b).

C. Administrative Remedies

Although providers cannot appeal a temporary payment suspension, a suspension “may culminate in an appealable determination . . . if [reimbursement] claims are subsequently denied.” 61 Fed.Reg. 63740, 63743 (Dec. 2, 1996). Further, CMS may issue an overpayment demand if the agency concludes there was fraud. 42 C.F.R. § 405.372(c). An overpayment demand is a decision that trigger's the Medicare Act's administrative appeals process. See id. §§ 405.904(a)(2), 405.375(c). Under this process:

Before filing suit in court, a Medicare beneficiary must proceed through five levels of administrative review, described in regulations issued by CMS as follows: (1) an initial determination by the Medicare administrative contractor; (2) a redetermination by the Medicare administrative contractor; (3) reconsideration by a qualified independent contractor; (4) a hearing before an administrative law judge . . .; and (5) review by the Medicare Appeals Council. If the beneficiary is dissatisfied with the Appeals Council's decision, he or she may then seek judicial review.

Glob. Rescue Jets, 30 F.4th at 911 (citations omitted) (citing 42 C.F.R. §§ 405.920, 405.940, 405.960, 405.1000, 405.1136).

II. Prior Action

As mentioned, Plaintiffs treat patients with chronic pain. (Compl. ¶ 7.) A “plurality of the patients in Plaintiffs' medical practice and surgery center are Medicare beneficiaries.” (Id. ¶ 10.) In September 2021, Plaintiffs stopped receiving payments from Medicare “without notice or explanation.” (Id. ¶ 11.)

In late 2021, Plaintiffs sued HHS and Qlarant Integrity Solutions, LLC to remove the suspension and receive payments for their outstanding claims. San Diego Comprehensive Pain Mgmt. Ctr., Inc. v. Becerra, No. 21-CV-01739-BAS-WVG, 2021 WL 5741465 (S.D. Cal. Dec. 2, 2021) (“SDCPMC I”). Qlarant “is the UPIC for Medicare and Medicaid Program Integrity in the Western jurisdiction, which includes California.” (Love Decl. ¶ 7, ECF No. 8-2.) The first Defendant in the present case- Sandra Love-is the President of Qlarant. (Id. ¶ 1.) In addition, during the period relevant here, Defendant Jaysen Eisengrein served as Qlarant's Program Director for its UPIC role. (Eisengrein Decl. ¶ 4, ECF No. 8-1.)

In the prior case, Plaintiffs demanded that their suspension be immediately terminated and moved for a temporary restraining order. After a hearing, the Court denied Plaintiffs' request for preliminary relief.

Soon after, the Court issued an order addressing exhaustion of administrative remedies under the Medicare Act. SDCPMC I, 2021 WL 5741465. Plaintiffs conceded “that they ha[d] not exhausted the administrative remedies available to them.” Id. at *3. Hence, the Court analyzed whether waiving the exhaustion requirement was appropriate.

Id. The Court found waiver was not warranted. Id. at *4-6. The Court consequently dismissed Plaintiffs' action for lack of subject matter jurisdiction. Id....