Rio Home Care, LLC v. Azar
| Decision Date | 11 March 2019 |
| Docket Number | CIVIL ACTION NO. 7:17-CV-116 |
| Parties | RIO HOME CARE, LLC, Plaintiff, v. ALEX M. AZAR, II, et al., Defendants. |
| Court | U.S. District Court — Southern District of Texas |
Plaintiff Rio Home Care, LLC ("Rio") seeks judicial review of a decision by Defendant Secretary of Health and Human Services ("HHS") finding that Rio was overpaid $4,079,073 on Medicare claims it submitted for home health care services. An HHS program integrity contractor audited a sample of 41 claims that Rio submitted during a two-year period and found that 35 of them did not qualify for Medicare coverage—an error rate of 85 percent. The total overpayment amount was determined by a statistical extrapolation from the 41 audited sample claims to the 2,197 similar claims that Rio submitted during the two-year period.
After receiving notice of the overpayment, Rio invoked the multi-level Medicare administrative review process. In addition to challenging the determination that the 35 claims were not covered by Medicare, Rio contested the statistical validity of the sampling method and the extrapolation. Rio later also claimed that its due process rights were violated by the HHS contractor's excessive delay in providing some of the statistical data needed to test the overpayment determination.
After adverse rulings at the initial levels of administrative review, an Administrative Law Judge ("ALJ") issued a decision that was partially favorable to Rio. Although the ALJ affirmed the determination that Medicare coverage was properly denied for the 35 individual claims that were audited, he also found that the statistical sample was invalid, that the extrapolated amount was not properly determined, and that Rio's due process rights were violated. However, the ALJ's decision regarding the statistical validity of the sampling and extrapolation was reviewed by the Medicare Appeals Council ("Council"), which reversed the portions of the ALJ's decision that were favorable to Rio. The Council found that the sampling and extrapolation were statistically valid and that Rio's due process rights had not been violated. Rio did not challenge the ALJ's adverse rulings on the individual claims, and the Council did not address that issue.
In seeking judicial review of the Secretary's final administrative decision, Rio asserts three principal claims: 1) that the selection of the sample deviated from applicable statistical standards; 2) that an impermissible extrapolation method was used; and 3) that Rio's due process rights were violated as a result of the HHS contractor's lengthy delay in providing Rio with statistical data. Rio also challenges the ALJ's rulings on the individual claims. The parties have fully briefed the issues in cross-motions for summary judgment. (Docket Nos. 34, 39, 42.) In addition to responding to the claims asserted by Rio, the Secretary contends that Rio failed to exhaust its administrative remedies regarding the individual coverage determinations.
After carefully considering the parties' briefing, the record, and the applicable law, the undersigned concludes that Rio's request to set aside the Council's decision should be denied. When considered in light of the deferential standard of review that applies, Rio has failed to show that the Council's decision upholding the overpayment determination lacks substantial evidence, that it is arbitrary and capricious, or that it is otherwise contrary to law. Although Rio relies onopinion evidence from its well-qualified expert statistician in challenging the sampling and extrapolation methodology, the Council's decision is supported by substantial evidence, including evidence from several qualified statisticians. And while the HHS contractor's delay in providing some of the relevant statistical data is troubling and should not be condoned, Rio has failed to show that this conduct violated its constitutional right to due process. At the end of the day, Rio received the needed data and used it in arguments before the ALJ and the Council, and both the ALJ and the Council conducted a de novo review of Rio's claims. Because Rio did not request Council review of the ALJ's decision denying the individual claims, those claims are unexhausted and not properly before the Court. Accordingly, for the reasons explained further below, it is recommended that Rio's summary judgment motion be denied and that the Secretary's motion be granted.
Plaintiff Rio provides home health care services to patients in south Texas. "The Medicare program reimburses health care providers who render services to Medicare beneficiaries." Maxmed Healthcare, Inc. v. Price, 860 F.3d 335, 337 (5th Cir. 2017). This case is about whether and how much Rio was overpaid on claims for services to Medicare beneficiaries.
"Medicare is a federally funded health insurance program for the elderly and disabled." Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 506 (1994); see 42 U.S.C. § 1395 et seq. (the"Medicare Act"). The Medicare program is administered by HHS. The Centers for Medicare and Medicaid Services ("CMS") is a division of HHS and is responsible for overseeing the Medicare program. CMS, in turn, contracts with private government contractors, called Medicare Administrative Contractors, to process and make payments on Medicare claims.3 See 42 U.S.C. § 1395kk-1; 42 C.F.R. §§ 405.904(a)(2), 421.401.
The Medicare Act provides that "no payment may be made ... for any expenses incurred for items or services ... which... are not reasonable and necessary for the diagnosis or treatment of illness or injury. ..." 42 U.S.C. § 1395y(a)(1)(A); 42 C.F.R. § 411.15(k)(1). Medicare providers bear the burden of maintaining and producing information to support their payment claims. See 42 C.F.R. § 424.5(a)(6).
Enormous numbers of Medicare claims are submitted each year.4 To expedite claims processing, Medicare contractors generally reimburse providers for services before reviewing the medical records relating to the claims and verifying that the claims are valid. See John Balko & Assocs., Inc. v. Sec'y U.S. Dep't of Health & Human Servs., 555 F. App'x 188, 190 (3d Cir. 2014); see also 42 C.F.R. § 405.922 ().
While this process provides faster payments to providers, it also results in huge amounts of Medicare overpayments.5 "Congress created the Medicare Integrity Program through which the Secretary contracts with private entities 'for the purpose of identifying underpayments and overpayments and recouping overpayments[.]'" Maxmed Healthcare, Inc., 860 F.3d at 337 (quoting 42 U.S.C. § 1395ddd(a), (h)(1)). The Medicare Integrity Program established a procedure to review payments made to providers to "increase the effectiveness of the [Medicare Program] through cost avoidance, savings, and recoupments of fraudulent, wasteful, or abusive expenditures." 42 U.S.C. § 1395ddd(g)(1)(A)(iii). Payments initially made by Medicare contractors Family Rehab., Inc. v. Azar, 886 F.3d 496, 499 (5th Cir. 2018) (footnote omitted); see 42 U.S.C. § 1395ddd(g), (h).
In a 1986 administrative ruling, CMS approved the use of statistical sampling and extrapolation in determining whether there has been an overpayment and in calculating the total amount of any overpayment. See Ruling 86-1 at 10.6 It is now well-settled that Maxmed Healthcare, Inc., 860 F.3d at 337 (citing 42 U.S.C. § 1395ddd(f)(3)(A)). CMS has developed guidelines for the use of statistical sampling and extrapolation in estimating overpayments, which are found in its Medicare Program Integrity Manual ("MPIM").7
Health care providers can challenge a ZPIC's overpayment determination through an elaborate five-step appeal process:
Providers who dispute an overpayment determination may challenge it in a lengthy appeal process. At the outset, a Medicare Administrative Contractor makes an "initial determination" regarding the overpayment amount. See 42 C.F.R. § 405.920. A provider who is displeased with the Medicare Administrative Contractor's initial determination may then seek a "redetermination"—the first step in a five-step appeal process. Id. §§ 405.940-958. The redetermination is conducted by employees of the Medicare Administrative Contractor who were not involved in the initial determination. Id. § 405.948. Second, if the provider remains dissatisfied, the provider may request a "reconsideration." Id. § 405.960. A Qualified Independent Contractor [QIC], another private contractor, conducts the "independent" reconsideration. Id. § 405.968. Third, if the provider still remains dissatisfied, the provider may request a hearing before an administrative law judge (ALJ). Id. § 405.1000(a). The ALJ reviews the case de novo. Id. § 405.1000(d). Fourth, either the provider or CMS, through its contractors, may request that the Medicare Appeals Council (Council) review the ALJ's decision. Id. § 405.1100(a). The Council, like the ALJ, reviews the case de novo, and its decision constitutes the Secretary's final decision. Id. § 405.1000(c). Fifth, if all else fails, the provider is entitled to "judicial review of the Secretary's final decision ... as is provided in section 405(g) of this title." 42 U.S.C. § 1395ff(b)(1)(A).
During the two-year period from June 1, 2007, to May 31, 2009, Rio submitted over...
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