Simply Home Healthcare, LLC v. Advancemed Corp.
| Decision Date | 27 January 2020 |
| Docket Number | Case No. 19 C 2313 |
| Parties | SIMPLY HOME HEALTHCARE, LLC, individually and on behalf of others similarly situated, Plaintiff, v. ADVANCEMED CORPORATION, and, ALEX M. AZAR II, in his official capacity as Secretary of the Department of Health and Human Services, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
For the reasons stated herein, the Defendants' Motion to Dismiss (Dkt. No. 14.) is granted.
Title XVII of the Social Security Act and its implementing regulations govern Medicare, the federal medical insurance program for the aged and disabled. See 42 U.S.C. §§ 1395-1395111 (2018); 42 C.F.R. § 405 ("the Medicare Act"). The Secretary of the United States Department of Health and Human Services ("the Secretary") delegates the responsibility for administering Medicare to the Centers for Medicare & Medicaid Services ("CMS"). CMS then contracts with private entities to carry out certain tasks. Specifically, CMS contracts with Medicare Administrative Contractors ("MACs") to process and pay reimbursement claims and Unified Zone Program Integrity Contractors ("UPICs") to identify suspected cases of Medicare fraud and prevent the mistaken overpayment of Medicare funds to healthcare providers. CMS and its contractors have the authority to temporarily suspend Medicare reimbursements to a home healthcare agency when there is reliable evidence of overpayment or a credible allegation of fraud. 42 C.F.R. § 405.371(a). Defendant AdvanceMed is one such CMS UPIC. (Compl., ¶ 27, Dkt. No. 1.) Plaintiff Simply Home is an Illinois limited liability company authorized to provide home healthcare services to Medicare beneficiaries and to seek reimbursement for such services. (Id. ¶ 24.)
On April 17, 2017, AdvanceMed suspended Medicare reimbursements to Simply Home. (Id. ¶ 90.) On April 19, 2017, Simply Home received two letters from AdvanceMed, each dated April 18, 2017. (Id. ¶ 91.) The first letter notified Simply Home that reimbursements were suspended as of April 17, 2017, "based on reliable information that an overpayment exists or that the payments to be made may not be correct" and initiated prepayment review of Simply Home's future reimbursement claims (Notice of Suspension of Medicare Payments at 1, Ex. G to Compl., Dkt. No. 1-7, ¶ 92.) The second letter requested medical documentation required to perform a post-payment audit of Simply Home'sreimbursement claims. (Medical Records Request, Ex. H to Compl., Dkt. No. 1-8, ¶ 93.)
After sending the requested documentation, Simply Home submitted a rebuttal statement to AdvanceMed on May 2, 2017. (Compl., ¶ 95.) On May 10, 2017, AdvanceMed sent Simply Home a letter explaining that it had forwarded the rebuttal statement to CMS and that the suspension "based on credible allegations of fraud" was to continue. (Suspension Rebuttal Response at 1, Ex. I to Compl., Dkt. No. 1-9, ¶ 96.) Simply Home then submitted a supplemental rebuttal statement to AdvanceMed on May 16, 2017 that proposed a modified suspension. (Compl., ¶ 101.) On May 24, 2017, AdvanceMed sent Simply Home a letter rejecting the supplemental rebuttal statement's modified suspension proposal, reiterating that the initial letter had been forwarded to CMS, and stating that the suspension "based on credible allegations of fraud" was to continue. (Second Suspension Rebuttal Response at 1, Ex. J to Compl., Dkt. No. 1-10, ¶ 102.) In July 2017, Simply Home transferred its patients to other agencies and laid off most of its employees. (Compl., ¶ 106.)
On September 26, 2017, AdvanceMed sent two letters to Simply Home. (Id. ¶ 117.) The first letter informed Simply Home that the suspension was "based on reliable information that an overpayment exists or that the payments to be made may not be correct," and asserted that Simply Home owed the Medicare Trust Funds$5,477,879.00. (Post-Payment Review Results and Overpayment Determination at 3, Ex. L to Compl., Dkt. No. 1-12, ¶ 118.) The letter also explained the debt calculation and how interest would accrue. (Id. at 8, 12-13.) The second letter terminated the suspension and informed Simply Home that it could again submit reimbursement claims, subject to fund recovery for the previously denied claims. (Notice of Termination of Suspension of Medicare Payments, Ex. N to Compl., Dkt. No. 1-14, ¶ 125.)
On October 31, 2017, Simply Home sent a request for redetermination to Palmetto GBA ("Palmetto"), the assigned MAC. (Compl., ¶ 130.) Palmetto responded on December 28, 2017, notifying Simply Home that the total debt would be slightly reduced and of its right to appeal to a qualified independent contractor. (Medicare Redetermination Decision, Ex. P to Compl., Dkt. No. 1-16, ¶ 132.) Simply Home then appealed to Maximus Federal Services ("Maximus"), the assigned qualified independent contractor, on February 21, 2018. (Compl., ¶ 133.) Maximus denied the second appeal on April 24, 2018 and notified Simply Home of its right to appeal to an administrative law judge ("ALJ"). (Medicare Appeal, Ex. Q to Compl., Dkt. No. 1-17, ¶ 134.)
Only CMS's final determinations can be appealed to a district court. 42 U.S.C. § 405(h). The decision to temporarily suspend reimbursements is not a final determination, and thus is not appealable. 42 C.F.R. § 405.375(c). Although suspensiondeterminations are not immediately appealable, providers are entitled to appeal any subsequent overpayment determination through a four-part administrative process. 42 U.S.C. § 1395ff; 42 C.F.R. § 405.904.
The administrative process is as follows: First, the provider can seek redetermination from the contractor. 42 U.S.C. § 1395ff(a)(3); 42 C.F.R. §§ 405.904, 405.940-958. Second, the provider can seek reconsideration by a qualified independent contractor. 42 U.S.C. § 1395ff(c); 42 C.F.R. §§ 405.904, 405.960-966. Third, if the amount in controversy minimum is met, the provider can request a hearing from an ALJ. 42 U.S.C. § 1395ff(d); 42 C.F.R. §§ 405.904, 405.1000-1058. Finally, the provider can seek review of the ALJ's decision by the Medicare Appeals Council. 42 U.S.C. § 1395ff(d); 42 C.F.R. §§ 405.1100-1130. The Council's decision is final and subject to judicial review in federal district court. 42 U.S.C. §§ 405(g)-(h), 1395ii; 42 C.F.R. §§ 405.1130-36.
On April 5, 2019, Simply Home brought this putative class action against the Secretary and AdvanceMed. Simply Home seeks declaratory relief and monetary damages for tortious interference with an existing contract and violation of procedural due process rights. AdvanceMed moves to dismiss the Complaint for lack of subject matter jurisdiction.
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) challenges a court's subject matter jurisdiction. On a motion to dismiss, a court accepts as true the well-pleaded factual allegations in the complaint, drawing all reasonable inferences in favor of the plaintiff. Ctr. for Dermatology & Skin Cancer, Ltd. v. Burwell, 770 F.3d 586, 588 (7th Cir. 2014). Yet, in the context of a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, the plaintiff bears the burden of establishing that jurisdictional requirements are met. Id. at 588-89.
Defendants move to dismiss for lack of subject matter jurisdiction because Simply Home failed to exhaust administrative remedies. If Simply Home does not have a properly exhausted claim for which jurisdiction exists, it cannot assert a claim on behalf of an alleged class of injured victims. Simply Home asserts that it exhausted administrative remedies because 42 C.F.R. § 405.375(c) precludes appeals. Alternatively, Simply Home argues that the exhaustion requirement is waived for futility. For the reasons stated below, the Court finds that it lacks subject matter jurisdiction because Simply Home failed to exhaust administrative remedies.
Congress purposely limited the jurisdiction of federal courts in cases involving Medicare. See 42 U.S.C. § 1395ff(b)(1)(A)(incorporating 42 U.S.C. § 405(g)); 42 U.S.C. § 1395ii (incorporating 42 U.S.C. § 405(h)). Section 405(h) "demands the 'channeling' of virtually all legal attacks through the agency." Shalala v. Ill. Council on Long Term Care, Inc., 529 U.S. 1, 13 (2000); see also Michael Reese Hosp. & Med. Ctr. v. Thompson, 427 F.3d 436, 441 (7th Cir. 2005) (). Section 405(g) dictates that judicial review is foreclosed until the claimant has exhausted administrative remedies and received a final decision from the Secretary. Health Equity Res. Urbana, Inc. v. Sullivan, 927 F.2d 963, 965 (7th Cir. 1991).
When read together, Sections 405(g) and 405(h) require exhaustion of administrative remedies prior to judicial review of any claim arising under the Medicare Act. Heckler v. Ringer, 466 U.S. 602, 627 (1984). A claim "arises under" the Medicare Act "'when both the standing and the substantive basis for the presentation' of the claims" originate from the Medicare Act. Id. at 615 (quoting Weinberger v. Salfi, 422 U.S. 749, 760-61 (1975)); see also Ancillary Affiliated Health Servs., Inc. v. Shalala, 165 F.3d 1069, 1071 (7th Cir. 1998) (); Bodimetric Health Servs., Inc. v. Aetna Life & Cas., 903 F.2d 480, 483 (7th Cir. 1990) ().
The claims here arise under the Medicare Act as Simply Home admits in its Complaint, despite elsewhere framing its allegations as collateral claims. A party cannot style its claims as collateral to avoid the Medicare Act's jurisdictional requirements. See Bodimetric, 903 F.2d at 487 (...
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