Wolcott v. Sebelius

• Citation: 635 F.3d 757
• Decision Date: 15 March 2011
• Docket Number: No. 10–10290.,10–10290.
• Parties: RANDALL D. WOLCOTT, M.D., P.A., Plaintiff–Appellant,v.Kathleen SEBELIUS, in her official capacity as Secretary of Health and Human Services of the United States; Trailblazer Health Enterprises LLC, Defendants–Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

635 F.3d 757

RANDALL D. WOLCOTT, M.D., P.A., Plaintiff–Appellant,

v.Kathleen SEBELIUS, in her official capacity as Secretary of Health and Human Services of the United States; Trailblazer Health Enterprises LLC, Defendants–Appellees.

No. 10–10290.

United States Court of Appeals, Fifth Circuit.

March 15, 2011.

Jonathan Millea Bye (argued), Lindquist & Vennum, P.L.L.P., Minneapolis, MN, John Phelps LeVick, Christopher Bradley Slayton, Jones, Flygare, Brown & Wharton, P.C., Lubbock, TX, for Plaintiff–Appellant.Edmond Dante Anderson, III, Asst. Regional Counsel (argued), Dept. of Health & Human Services, Office of General Counsel Region VI, Dallas, TX, Edwin Scott Forst, Lubbock, TX, for Defendants–Appellees.Appeal from the United States District Court for the Northern District of Texas.Before WIENER, GARZA, and PRADO, Circuit Judges.PRADO, Circuit Judge:

This appeal arises from the district court's dismissal under Rule 12(b) of five claims for mandamus relief brought by Plaintiff–Appellant Randall D. Wolcott, M.D., P.A. (“Wolcott”), a provider of wound-care services. Wolcott is suing Defendant–Appellee Kathleen Sebelius (“Secretary”), in her official capacity as Secretary of Health and Human Services, the agency that administers the Medicare Program, and TrailBlazer Health Enterprises, LLC (“TrailBlazer”), a for-profit limited liability company that has been contracted to administer payment of Medicare benefits in Texas.

Wolcott organized his five mandamus claims by count. Additionally, Wolcott brought a claim for violations of procedural and substantive due process under the Fifth Amendment and a claim for violations of the Administrative Procedures Act. The defendants moved for dismissal of the entire action arguing that there was no subject matter jurisdiction because Wolcott failed to meet the requirements for judicial review under 42 U.S.C. § 405(g) and (h), and that Wolcott had failed to plead claims upon which mandamus relief may be granted. The district court granted the defendants' motion and dismissed the entire action. Wolcott appeals only the dismissal of the five mandamus actions. We AFFIRM the dismissal of Counts II, III, IV, and V, and REVERSE and REMAND the dismissal of Count I.

I. BACKGROUND

A. The Parties

Wolcott is a professional association organized under the laws of Texas with its principal offices located in Lubbock, Texas. Wolcott is a provider of wound-care services, including debridement, which is the removal of dead, damaged, or infected tissue to expose healthy tissue. Since 1994, Wolcott is a participating supplier of professional medical services under Part B of the federal Medicare program. Kathleen Sebelius is named in her official capacity as Secretary of the United States Department of Health and Human Services, the agency that administers the Medicare Program. TrailBlazer is a for-profit limited liability company organized in Texas and an affiliate of BlueCross BlueShield of South Carolina. TrailBlazer is a Medicare Contractor or “carrier” that has contracted to administer the payment of Medicare benefits in Texas.

B. The Administrative Appeals Process for Medicare Claims

This case involves Wolcott's reimbursement claims under Medicare Part B. 42 U.S.C. §§ 1395j–1395w. Part B is a federally subsidized, voluntary health insurance program that provides supplemental insurance coverage for certain items, including outpatient physician services rendered in clinic settings. See id.

The Secretary delegates the administration of the Medicare Act to the Centers for Medicare and Medicaid Services (“CMS”). CMS contracts with private insurance companies to perform carrier functions. See 42 C.F.R. § 421.5. These carriers process claims, determine whether services are covered by Medicare, and determine the amount of payment for services furnished, among other duties. 42 C.F.R. § 421.200. TrailBlazer is acting as the Medicare carrier for Wolcott.

Medicare has a highly structured appeals process for claims:

The Medicare contractor makes an initial determination when a claim for Medicare benefits under Part A or Part B is submitted. A beneficiary who is dissatisfied with the initial determination may request that the contractor perform a redetermination of the claim if the requirements for obtaining a redetermination are met. Following the contractor's redetermination, the beneficiary may request, and the Qualified Independent Contractor (QIC) will perform, a reconsideration of the claim if the requirements for obtaining a reconsideration are met. Following the reconsideration, the beneficiary may request, and the ALJ will conduct a hearing if the amount remaining in controversy and other requirements for an ALJ hearing are met. If the beneficiary is dissatisfied with the decision of the ALJ, he or she may request the [Medicare Appeals Council (“MAC”)] to review the case. If the MAC reviews the case and issues a decision, and the beneficiary is dissatisfied with the decision, the beneficiary may file suit in Federal district court if the amount remaining in controversy and the other requirements for judicial review are met.

42 C.F.R. § 405.904(a)(2).

C. Factual and Procedural Background

Because this appeal concerns motions to dismiss under Federal Rule of Civil Procedure 12(b), the facts presented below are as alleged by Wolcott.

Wolcott received assignments from his Medicare patient-beneficiaries. As the assignee, Wolcott stepped into the shoes of each patient-beneficiary and thus assumed each patient's right to payment and of appeal. Wolcott alleges that between March 2008 and June 2009, TrailBlazer denied virtually 100% of Wolcott's debridement claims, with a total value of over $700,000. Wolcott appealed these denials through the Medicare administrative appeals process. For the administrative appeals in which final decisions had been rendered by the time of the complaint, 100% of the defendants' denials were reversed. Ninety-two percent of the reversals came from decisions by administrative law judges (“ALJ”)—the third level of the Medicare administrative appellate process. The decisions favorable to Wolcott found that Wolcott “is entitled to Medicare payment for services rendered” and “ DIRECTED [TrailBlazer] to process the claim[s] in accordance with [the] decision.” (emphasis in original). Despite Wolcott's success in obtaining administrative appellate decisions reversing the denial of claims, the defendants allegedly affirmatively re-denied a subset of these claims for lack of medical necessity—the same basis on which TrailBlazer initially denied the claims.

Further, the defendants allegedly routinely failed to pay Wolcott within the legally prescribed time periods after Wolcott successfully appealed the denied claims. For example, Wolcott alleges in its complaint that after a September 5, 2008 ALJ decision approving $21,000 in payments, TrailBlazer failed to issue $11,500 of those claims until April, 2009—more than six months after the usual 40–day period by which payment should be paid after an administrative reversal of a claim denial.

Wolcott also alleges that the defendants acted unlawfully in processing new claims submitted subsequent to the appeals. Despite ALJ determinations that the defendants' stated rationales for denying past claims were legally invalid, Wolcott alleges that the defendants continue to use those same rationales to deny new claims. Specifically, the defendants have denied claims because allegedly: the number of debridements exceed five debridements per patient per year; Wolcott's services are “investigational or do not meet the medical standard of care for wound care”; Wolcott does not conduct contemporaneous Skin Oxygenation and Perfusion Assessments; Wolcott uses of standardized, template, or rote language in its documentation; and Wolcott fails to actively manage comorbidities.¹

Wolcott further contends that TrailBlazer automatically denies debridement claims in excess of five debridements per patient per year. Wolcott asserts the automatic denial of debridement claims in excess of five debridements per patient per year is contrary to law and TrailBlazer's own Local Coverage Determination (“LCD”).

Wolcott also asserts that the defendants have failed to remove Wolcott from non-random prepayment complex medical review (“prepayment review”), despite the fact that a carrier is typically prohibited from keeping a supplier on prepayment review for more than one year. Wolcott was on prepayment review beginning March 17, 2008. Despite having received a letter from the defendants informing it that they had removed Wolcott from prepayment review on March 21, 2009, Wolcott alleges it was still on prepayment review as of June 22, 2009 and that the defendants have denied more than 1,500 of Wolcott's claims, totaling in excess of $150,000, while it was on prepayment review.

In his complaint, Wolcott brought five claims for mandamus relief, a claim for violations of procedural and substantive due process under the Fifth Amendment, and a claim for violations of the Administrative Procedure Act. Wolcott organizes his five mandamus claims by counts. In Count I, Wolcott asks for mandamus compelling the defendants to process and pay successfully appealed claims in accordance with final administrative decisions. In Count II, Wolcott asks for an order in mandamus compelling the defendants to timely pay Wolcott for claims after it succeeds on appeal and to implement effective processes to effectuate timely payment as required by law. In Count III, Wolcott asks the Court to order the defendants to cease denying Wolcott's new claims for reasons that have previously been held invalid in final administrative decisions and to reverse all denials predicated on such invalid reasons. In Count IV, Wolcott asks for an order in mandamus compelling the defendants to reverse prepayment-review denials made after March 21, 2009, and to remove Wolcott from prepayment...