Select Specialty Hospital-Ann Arbor, Inc. v. Sec'y of Health & Human Servs.
| Decision Date | 08 February 2016 |
| Docket Number | Case No. 14-14412 |
| Parties | SELECT SPECIALTY HOSPITAL-ANN ARBOR, INC. (MATTILA) Plaintiff, v. THE SECRETARY OF HEALTH AND HUMAN SERVICES, Defendant. |
| Court | U.S. District Court — Eastern District of Michigan |
HON. TERRENCE G. BERG
HON. DAVID R. GRAND
In this case, a hospital that treated a patient covered by Medicare is suing the Secretary of Health and Human Services for reimbursement of the costs for over three months of treatment and procedures. The agency argues that the hospital never submitted its reimbursement claim correctly, and therefore this case is not properly before this Court and must be dismissed.
Plaintiff Select Specialty Hospital-Ann Arbor, Inc. brings this suit against Defendant Secretary of Health and Human Services seeking declaratory and injunctive relief. (See Dkt. 1, §§ 25-26, p. 6.) Plaintiff, a hospital in Ypsilanti, Michigan, treated patient Milda Mattila ("Mattila") from December 27, 2012 through April 12, 2013. (Dkt. 13, p. 6.) The parties agree that Mattila was insured by Medicare when Plaintiff treated her. (See Dkt. 1, ¶ 4; Dkt. 7, p. 7.) However, Medicare has not reimbursed Plaintiff for the care Plaintiff provided because itmaintains that Plaintiff has not filed a valid claim for reimbursement and the statutory deadline to do so has expired. (See Dkt. 7, pp. 12-13.)
Defendant now moves to dismiss this case pursuant to Federal Rule of Civil Procedure 12(b)(1). (Dkt. 7.) In its complaint, Plaintiff alleges subject matter jurisdiction on the bases of federal question jurisdiction pursuant to 28 U.S.C. §1331 and diversity jurisdiction pursuant to 28 U.S.C. §1332. (Dkt. 1, ¶¶ 13-18.) Defendant, however, maintains that this Court has no subject matter jurisdiction over this case on either basis. (See Dkt. 7.)
Defendant argues that diversity jurisdiction does not exist because agencies of the United States are not citizens of any state for the purposes of 28 U.S.C. §1332. (Dkt. 7, p. 9.) Moreover, 42 U.S.C. §405(h), incorporated into the Medicare Act via 42 U.S.C. §1395ii, prevents this Court from exercising federal question jurisdiction because Plaintiff: (1) never presented its claim to the Secretary or received an initial claim determination; and thus could not (2) exhaust its administrative remedies by appealing an initial determination through the administrative appeals process and receive a final decision from the Secretary for this Court to review. (Id. at 6, 11-12.) In short, Defendant alleges that Plaintiff is attempting to bypass the administrative review process and proceed directly to federal court.
In response, Plaintiff argues that: (1) it should not be required to exhaust its administrative remedies because proceeding through the administrative review process would have been futile; (2) Defendant should be equitably estopped fromarguing that Plaintiff failed to exhaust its administrative remedies because the employee of a Medicare contractor gave Plaintiff erroneous information regarding the filing and status of its claim; or (3) the Court should rely on equitable tolling principals to excuse Plaintiff's failure to resubmit its claim within the Medicare Act's one-year deadline established in 42 C.F.R. 424.44(a)(1). (Dkt. 13, pp. 8-13.) In its supplemental brief submitted on October 19, 2015, Plaintiff also maintains that the Court should find that the six-month extension of time to file a claim pursuant to 42 C.F.R. §424.44(b)(5) applies. (Dkt. 17, p. 4.)
After oral argument on September 28, 2015, the Court directed the parties to submit supplemental briefing on the following points: (1) when Plaintiff was sent a computer-generated message rejecting Plaintiff's claim for reimbursement; (2) the format of the message and what details it contained; (3) when Plaintiff received the claim rejection message; (4) whether Douglas C. Dyer ("Dyer") is employed by Novitas Solutions, Inc.; and (5) the dates and details of any conversations that took place between Plaintiff and Dyer. The parties timely submitted their supplemental briefs by October 19, 2015. (See Dkts. 16-17.)
Defendant's motion is now fully briefed, all supplemental briefing has been submitted, and oral argument has been heard. While the Court has some sympathy with Plaintiff's dilemma, the agency must be given the opportunity to decide, before the Court intervenes, whether and how to apply its own policies and regulations, and to correct any irregularities in its own procedure, in the context of these particular facts. Because the Court will find that the agency has not yet beenafforded such an opportunity, the law requires that Defendant's motion be GRANTED and this case be DISMISSED WITHOUT PREJUDICE for lack of subject matter jurisdiction.
The Medicare Act establishes a federal program of health insurance for the elderly and disabled. See 42 U.S.C. §1395, et seq. The Secretary of Health and Human Services ("the Secretary") administers the Medicare program, but has delegated most administrative responsibilities to Centers for Medicare and Medicaid Services ("CMS"). See Health Care Financing Administration; Statement of Organization, Functions, and Delegations of Authority, 46 Fed. Reg. 56,911 (Nov. 19, 1981); see also 42 C.F.R. §400.200. CMS is authorized to use contractors to administer the Medicare program. See 42 U.S.C. §§1395h, 1395u; 42 C.F.R. §421.5. In this case, CMS authorized Novitas to assist with processing Medicare claims, and as a Medicare administrative contractor, Novitas is bound by the Medicare statute, the regulations and guidelines issued by CMS.
In October 2012, Milda Mattila received a contaminated methylprednisolone acetate ("MPA") injection for joint pain at the Michigan Pain Specialists clinic in Ann Arbor, Michigan. (Dkt. 13, p. 6.) As a result of ensuing complications, Mattila required significant medical intervention and treatment at Plaintiff Select Specialty Hospital-Ann Arbor, Inc.'s Ypsilanti, Michigan facility from December 27, 2012 to April 12, 2013. (See Dkt. 1, ¶¶ 2-3; Dkt. 1, Ex. E, p. 1.) Mattila was covered by Medicare health insurance at the time of treatment. (Dkt. 7, p. 17.)
On November 16, 2012, Mattila filed a products liability suit in the Eastern District of Michigan arising out of the contaminated MPA injection. (Dkt. 13, p. 6, Ex. B.) Before judgment could be rendered, however, the Defendant in that case, New England Compounding Pharmacy, Inc. ("New England"), filed for Chapter 11 bankruptcy. (Dkt. 13, p. 6, Ex. C.) Consequently, Mattila's suit was stayed on January 31, 2013. (Dkt. 13, p. 6.) On February 28, 2013, Mattila's case was transferred to the District of Massachusetts as part of a multidistrict litigation proceeding against Defendant New England.1 See Mattila et al v. New England Compounding Pharmacy, Inc., Case No. 12-15083 (E.D. Mich), Dkt. 12.
On June 25, 2013,2 Novitas received an electronically-submitted claim from Plaintiff requesting a conditional payment totaling $501,515.23 for Mattila's medical care. (See Dkt. 1, ¶¶3-4; Dkt. 7, Ex. 1.) By filing this type of claim, Plaintiff asked Medicare to pay Mattila's treatment expenses now on the condition that Medicare would be reimbursed from any lawsuit settlement proceeds. (Dkt. 7, Ex. 2, ¶ 5.) Plaintiff submitted its claim via the Fiscal Intermediary Shared System ("FISS"), a computer system through which enables providers like Plaintiff to communicate with Novitas in order to submit claims and review claim-related information. (See Dkt. 16, Ex. 1, ¶¶3-4; Dkt. 17, p. 2.)
On July 25, 2013, approximately one month after Plaintiff submitted the Mattila claim, Novitas posted notice of its rejection on FISS. (See Dkt. 7, Ex. 1; Dkt. 17, Ex. A, ¶ 5.) Plaintiff acknowledges becoming aware of the rejection notice on or about that same date. (Dkt. 17, p. 2.) FISS automatically rejects incorrectly-coded claims. (Dkt. 7, Ex. 2, ¶ 6.) In this case, there was a coding discrepancy because the claim was submitted under "Claim Adjustment Reason Code 20" ("CARC 20"), a code indicating that Plaintiff has already received payment from a primary liability carrier and is billing Medicare as a secondary payer, but with a "Value Code" indicating that no money had been received from the primary insurer.3 (See Dkt 7, Ex. 1 and Ex. 2, ¶ 7-8.) A claim coded under CARC 20 is thus inconsistent with the conditional payment Plaintiff was seeking from Medicare and with the Value Code Plaintiff submitted. Accordingly, FISS automatically rejected Plaintiff's conditional payment claim because it was billed incorrectly. (See Dkt. 7, Ex. 1 and Ex. 2, ¶ 7.)
Upon detecting the discrepant code values, FISS generated a notice explaining that the claim had been rejected under rejection code 31266. (See Dkt. 7, Ex. 1.) Rejection code 31266 is used to indicate a discrepancy between the CARCand the Value Code. (Dkt. 7, Ex. 2, ¶ 8.) The notice included a narrative statement explaining that there was a discrepancy between the CARC and Value Code charges4 and directed Plaintiff to "cancel the rejected claim, make corrections as needed on a new claim and submit." (Dkt. 7, Ex. 1.) Plaintiff, however, never followed these instructions and cannot resubmit this particular claim now because the one-year deadline to do so established by 42 C.F.R. §424.44(a)(1) has expired.5 (See Dkt. 13, p. 7.)
Plaintiff maintains that it relied on incorrect instructions and information from Novitas employee Douglas Dyer. Dyer has worked for Novitas since 2008, and has been a manager in the Claims Department since July 2012. (Dkt. 16, Ex. 1, ¶ 9.) According to Plaintiff, it "had discussions" with Dyer at some point prior to submitting the Mattila claim about how to properly submit it. (Dkt. 17, Ex. A, ¶ 3.) Plaintiff does not document when these conversations occurred, how many such conversations Plaintiff had with Dyer, or their content,6 bu...
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