336 F. Supp. 3d 599
D.S.C.2018Background
- Plaintiff is a South Carolina chiropractic practice that derives a significant portion of revenue from Medicare and faced a post-payment audit by a ZPIC (AdvanceMed) beginning in 2012.
- AdvanceMed audited samples, extrapolated overpayments, and issued an overpayment determination exceeding $6 million; CMS/Palmetto GBA began recoupment and has withheld over $1.8 million pending appeal.
- Plaintiff exhausted initial administrative levels and timely requested ALJ hearings at OMHA in 2016; hearings remain delayed for over two years due to OMHA backlog.
- Plaintiff alleges recoupment while awaiting statutorily mandated ALJ review violates procedural due process, is ultra vires, and violates the APA; it sought a TRO to halt collection/recoupment and referrals to Treasury/collectors.
- The district court found likelihood of success on the procedural due process claim, irreparable harm (risk of bankruptcy and lost services/jobs), the equities and public interest favor relief, and granted a 14-day TRO enjoining withholding and collection efforts; bond was waived.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether recoupment during excessive ALJ delays violates procedural due process | Recoupment deprives plaintiff of property without the timely ALJ hearing required by statute; ALJ reversal rates are high | Government relies on statutory authority to recoup and asserts inability to provide immediate hearings due to backlog | Court: Likely success on merits of due process claim — private interest, high risk of erroneous deprivation, and no undue burden on gov't weigh for plaintiff |
| Whether plaintiff will suffer irreparable harm absent injunction | Continued recoupment will force closure, bankruptcy, loss of jobs, and loss of patient access | Government: can recoup later if it prevails; no irreparable harm asserted that outweighs gov't interest | Court: Plaintiff demonstrated imminent, irreparable harm and lack of adequate remedy at law |
| Balance of equities and public interest | Harms to plaintiff, employees, and patients outweigh harm to gov't | Gov't interest in recovering alleged overpayments and preventing improper payments | Court: Equities and public interest favor enjoining recoupment pending preliminary injunction decision |
| Whether bond must be posted for TRO | Plaintiff sought waiver given public-interest and low risk to Defendants | Defendants would be harmed if injunction wrongly issued and cannot recover without bond | Court: Exercised discretion to waive bond; defendants can resume recoupment if order dissolved |
Key Cases Cited
- Mathews v. Eldridge, 424 U.S. 319 (1976) (framework for assessing procedural due process burdens and protections)
- Granny Goose Foods, Inc. v. Bd. of Teamsters & Auto Truck Drivers, 415 U.S. 423 (1974) (TRO purpose: preserve status quo and prevent irreparable harm pending hearing)
- Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7 (2008) (four-factor test for preliminary injunction/TRO)
- Pashby v. Delia, 709 F.3d 307 (4th Cir. 2013) (district court discretion to set or waive injunction bond)
- Am. Hosp. Ass'n v. Burwell, 812 F.3d 183 (D.C. Cir.) (describing Medicare appeals structure and backlog impact)
- Cumberland Cty. Hosp. Sys. v. Burwell, 816 F.3d 48 (4th Cir.) (court cannot order immediate ALJ hearings via mandamus)
- Hoechst Diafoil Co. v. Nan Ya Plastics Corp., 174 F.3d 411 (4th Cir.) (purpose of Rule 65(c) bond to reimburse harm from improvidently issued injunction)