963 F.3d 516
6th Cir.2020Background
- General Medicine, a long-term-care medical provider, was audited beginning in 2002–2004 by CMS contractor AdvanceMed; AdvanceMed requested medical records from 12 facilities but did not notify or request records from General Medicine.
- AdvanceMed reviewed a 382-claim sample, allowed 68 claims in whole or in part, denied 314 claims, and extrapolated an assessed overpayment of $1,836,646.56 to a universe of 41,818 claims.
- General Medicine first learned of the audit results in 2007, pursued the full four-level Medicare administrative appeal process, and obtained reductions in the assessed overpayment; it also argued the entire assessment should be invalidated (or reduced to actual overpayments) because CMS failed to give statutorily required advance notice under 42 U.S.C. § 1395ddd(f)(7)(A).
- The Medicare Appeals Council concluded the lack of notice was inconsequential (General Medicine was not prejudiced) and that additional records would not have materially changed outcomes; the district court affirmed.
- The Sixth Circuit held for the first time that although the statute’s notice requirement is mandatory, courts may excuse noncompliance only if the provider was not substantially prejudiced by the lack of notice, and it affirmed because substantial evidence supported the Council’s no-prejudice finding.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a CMS contractor's failure to give statutorily required advance notice of a post-payment audit automatically voids an overpayment assessment | General Medicine: lack of notice warrants invalidation or reduction of the assessment | Government: statute is silent as to an automatic remedy; remedial voiding not required | Court: notice requirement is mandatory, but noncompliance does not automatically void an assessment; courts may excuse noncompliance only if the provider was not substantially prejudiced (harmless-error approach) |
| Whether General Medicine was substantially prejudiced by the lack of notice | General Medicine: would have used 30-day notice to gather, complete, and make legible its documentation from custodial facilities; loss of access to records by 2007 prejudiced its defense | Government: General Medicine had multiple years and levels of administrative review to present arguments; service-date notes supplied by facilities should stand alone and additional records would not have materially changed results | Court: Substantial evidence supports the Medicare Appeals Council’s conclusion that General Medicine was not substantially prejudiced; affirmed |
Key Cases Cited
- Williams v. Taylor, 529 U.S. 420 (2000) (start statutory interpretation analysis with text)
- Lamie v. United States Tr., 540 U.S. 526 (2004) (plain statutory language governs)
- Cook v. United States, 104 F.3d 886 (6th Cir. 1997) (approving harmless-error excuse for third-party-notice default)
- United States v. Montalvo-Murillo, 495 U.S. 711 (1990) (nonconstitutional error may be harmless)
- James Daniel Good Real Prop. v. United States, 510 U.S. 43 (1993) (courts ordinarily will not impose coerced sanction when statute omits consequence)
- Heston v. Comm’r of Soc. Sec., 245 F.3d 528 (6th Cir. 2001) (substantial-evidence review standard in administrative appeals)
- Cutlip v. Sec’y of Health & Human Servs., 25 F.3d 284 (6th Cir. 1994) (definition of substantial evidence)
- Palm Valley Health Care, Inc. v. Azar, 947 F.3d 321 (5th Cir. 2020) (public interest in effective Medicare administration)
- Shinseki v. Sanders, 556 U.S. 396 (2009) (prejudicial-error rule referenced in administrative review context)