555 F. App'x 188
3rd Cir.2014Background
- Balko, a Medicare provider for nursing-home residents, was audited by SafeGuard (a Medicare contractor) after suspiciously high, periodic billing patterns were observed.
- SafeGuard sampled 81 beneficiaries (581 claims) from a universe of 5,445, found a 99.85% error rate in the sample, and extrapolated total overpayments to $857,109; after appeals this was reduced to a $641,437 demand (77% error rate).
- Balko argued SafeGuard improperly used the same sample both to establish a “high level of payment error” and to extrapolate overpayments, violating 42 U.S.C. § 1395ddd(f)(3), and challenged the substantial-evidence basis for extrapolation.
- The ALJ invalidated extrapolation but sustained specific-claim overpayments; the Medicare Appeals Council (MAC) reversed, holding §1395ddd(f)(3) bars review of the Secretary’s high-error-rate determination and that extrapolation was supported by the record.
- The District Court granted summary judgment for the Secretary; the Third Circuit affirmed, holding it lacked jurisdiction to review the high-error determination and that MAC’s decision was supported by substantial evidence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether contractor may use sample both to find a high error rate and to extrapolate overpayments under 42 U.S.C. §1395ddd(f)(3) | Balko: Contractor must first make an independent finding of high/sustained error or failed education before extrapolation; using same sample for both is improper | Secretary: §1395ddd(f)(3) forbids judicial/administrative review of high-error determinations; contractors may use sampling that reveals error and then extrapolate | Held: §1395ddd(f)(3) unambiguously bars review of the Secretary’s (or delegated contractor’s) high-error determination; using the sample for both was permissible and not reviewable |
| Whether court can review procedural challenges to how high-error determination was reached | Balko: challenges to procedures used to reach the high-error finding are reviewable and its sample was invalid | Secretary: statute precludes review of determinations of high-error level regardless of procedural challenge | Held: Procedural objections to the high-error determination are likewise precluded by the statute; jurisdictional bar applies |
| Whether MAC’s reversal of ALJ credibility/findings was permissible | Balko: MAC improperly overruled ALJ credibility and record findings | Secretary: MAC reviews de novo, may adopt/modify/reverse ALJ; it reviewed entire administrative record | Held: MAC properly conducted de novo review and could reach different conclusions; ALJ credibility conclusions not controlling |
| Whether substantial evidence supported extrapolation and overpayment amount after appeals | Balko: sampling/statistical methodology invalid; MAC failed to cite specific record evidence | Secretary: SafeGuard followed MPIM and Medicare rulings; burden on Balko to prove invalidity | Held: Substantial evidence supports MAC’s decision; Balko failed to show the sample was statistically invalid |
Key Cases Cited
- Mercy Home Health v. Leavitt, 436 F.3d 370 (3d Cir.) (standards for reviewing Secretary decisions)
- Albert Einstein Med. Ctr. v. Sebelius, 566 F.3d 368 (3d Cir.) (definition of substantial evidence)
- In re Caterbone, 640 F.3d 108 (3d Cir.) (de novo review of jurisdictional challenges)
- Gentiva Healthcare Corp. v. Sebelius, 723 F.3d 292 (D.C. Cir.) (statutory bar precludes appellate review of high-error determinations)
- Almy v. Sebelius, 679 F.3d 297 (4th Cir.) (MAC exercises de novo review and need not defer to ALJ)
- International Rehab. Scis. Inc. v. Sebelius, 688 F.3d 994 (9th Cir.) (appellate review confined to agency decision on direct review)
- Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (U.S.) (statutory interpretation principle regarding non-legislator statements in legislative history)