937 F.3d 613
6th Cir.2019Background
- A1 Diabetes & Medical Supply was audited and alleged to have overcharged Medicare by about $7 million; initial redetermination and reconsideration upheld most overpayments.
- After second-level review A1 requested ALJ hearings (third level) in August 2018 but learned ALJ wait times were likely 3–5 years, not the statutory 90 days. A1 claimed imminent bankruptcy if recoupment proceeded by offsetting future reimbursements.
- A1 sought a preliminary injunction in district court to bar government recoupment until an ALJ hearing; the district court granted the injunction.
- The government appealed, and the Sixth Circuit considered jurisdiction (whether administrative exhaustion to the Appeals Council is jurisdictional) and the merits under the Mathews due process balancing test.
- The Sixth Circuit vacated the preliminary injunction and remanded for additional factual development on (1) why A1 did not use escalation procedures to obtain district court review sooner, (2) what relief and cross‑examination an ALJ hearing actually provides, (3) the government’s discretion and timing in recoupment/payment plans, and (4) statistical likelihood of obtaining additional relief at the ALJ level.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction under 42 U.S.C. §405(g): whether A1 had to complete all administrative levels before district court could hear its constitutional due process claim | A1 argued district court may hear constitutional challenge after presenting claim to the agency without completing Appeals Council review, consistent with Mathews | Government argued §405(g) requires a final decision (Appeals Council) before district court jurisdiction | Court held jurisdiction exists: presenting claim to the agency satisfies §405(g) for a due process challenge; exhaustion to the fourth level is not a hard jurisdictional bar |
| Due process: whether government may recoup payments before ALJ hearing without violating due process (preliminary injunction analysis) | A1 argued immediate recoupment would cause irreparable harm and violate due process given long ALJ delays | Government argued interest in timely recovery of overpayments and administrative/fiscal burden of delaying recoupment; two administrative levels already found overpayments | Court declined to decide on the merits; applied Mathews framework and found factual gaps requiring remand for further development before resolving likelihood of success |
| Availability/adequacy of ALJ process (procedural protections) | A1 emphasized need for live hearing and cross‑examination to rebut statistical extrapolations and prevent erroneous deprivation | Government pointed to written-review requirements at first two levels, limits on subpoenas and cross‑examination at ALJ, and that ALJ decisions often rest on written records | Court noted ambiguity about what additional protections ALJ hearings actually provide and whether escalation (waiving hearing) could afford quicker district court review; remanded for factfinding |
| Alternative remedies: escalation to Appeals Council/district court and installment/repayment plans | A1 declined to escalate, citing inability to survive delays and need for live hearing | Government suggested escalation and regulatory installment plans could mitigate harm; disputed whether certain recoupment timing constraints exist | Court found unresolved questions about escalation tradeoffs and government discretion to offer repayment plans; remanded for clarification before sustaining injunction |
Key Cases Cited
- Arbaugh v. Y & H Corp., 546 U.S. 500 (clarifies when statutory requirements are jurisdictional)
- Mathews v. Eldridge, 424 U.S. 319 (sets the three‑part due process balancing test for procedural protections)
- Shalala v. Illinois Council on Long Term Care, 529 U.S. 1 (discusses §405(g) and administrative review prerequisites)
- Weinberger v. Salfi, 422 U.S. 749 (addresses agency rulemaking authority and review schemes)
- Goldberg v. Kelly, 397 U.S. 254 (on the importance of pre‑deprivation hearings in certain public‑benefits contexts)
- Family Rehab., Inc. v. Azar, 886 F.3d 496 (Fifth Circuit decision reaching a similar jurisdictional conclusion)