365 F. Supp. 3d 742
N.D. Tex.2019Background
- Med-Cert Home Care, LLC is a Medicare-certified home health agency serving a niche Southeast Asian patient population; it claims >90% of revenue from Medicare.
- A ZPIC post-payment audit (sample of 46 claims) found ~97.8% error rate and extrapolated an alleged overpayment of $1,787,063.39 for Feb 5, 2015–Sept 3, 2016.
- Med-Cert exhausted the first two administrative levels (redetermination by MAC and reconsideration by QIC), appealed to an ALJ, and filed suit seeking a preliminary injunction to stop CMS from recouping pending the ALJ hearing.
- OMHA backlog delays ALJ hearings ~3+ years (average ~1,200 days for FY2018); ALJ decisions are statutorily required within 90 days.
- CMS began recoupment after QIC decision; Med-Cert says recoupment has reduced gross revenue >60%, net revenue ~95%, cut staff from 18 to 2, and threatens shutdown and loss of Medicare provider number.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Med-Cert has a protected property interest in withheld Medicare payments | Med-Cert has a property interest in payments for properly billed services now being recouped | Government: no protectable interest in retaining alleged overpayments | Court: Med-Cert has a property interest in Medicare payments for services rendered; not an interest in unentitled overpayments |
| Whether due process requires postponing recoupment until ALJ hearing given ALJ backlog | Recoupment before an ALJ decision (with multi-year backlog) creates high risk of erroneous deprivation and denies procedural due process | Escalation to Medicare Appeals Council and ultimately district court provides adequate process; delay does not mandate injunction | Court: ALJ hearing provides unique procedural protections (live hearing, cross-exam.); escalation does not adequately substitute; high risk of erroneous deprivation supports likelihood of success |
| Whether Med-Cert will suffer irreparable injury absent injunction | Continued recoupment will force Med-Cert to close, lose provider number and license, and irreparably harm patients and employees | Defendants: Med-Cert’s evidence is insufficient; could keep one patient or escalate appeals; recoupment effects manageable; bankruptcy/recoupment issues mitigate risk | Court: Affidavits credible; shutdown and loss of provider number/license constitute imminent, irreparable harm |
| Balance of harms and public interest | Harm to Med-Cert, employees and unique patient population outweighs temporary delay in recoupment; public interest favors continued access to specialized care | Government: injunction frustrates statutory recoupment scheme and backlog-reduction efforts; many other agencies could serve patients | Court: Delay in recoupment is not prejudicial (government can still recoup later); public interest favors preserving Med-Cert’s services; injunction warranted |
Key Cases Cited
- Mathews v. Eldridge, 424 U.S. 319 (1976) (framework for procedural due process balancing)
- Family Rehabilitation, Inc. v. Azar, 886 F.3d 496 (5th Cir. 2018) (ALJ backlog and injunction analysis; escalation inadequate)
- Smith v. North Louisiana Medical Review Ass'n, 735 F.2d 168 (5th Cir. 1984) (provider cannot claim property interest in money to which it is not entitled)
- Exhibitors Poster Exch., Inc. v. Nat'l Screen Serv. Corp., 441 F.2d 560 (5th Cir. 1971) (purpose of preliminary injunction is to preserve the status quo)
- Sugar Busters LLC v. Brennan, 177 F.3d 258 (5th Cir. 1999) (four-factor preliminary injunction test)
- Geders v. United States, 425 U.S. 80 (1976) (cross-examination can materially develop the record)
- Infinity Healthcare Servs., Inc. v. Azar, 349 F. Supp. 3d 587 (S.D. Tex. 2018) (provider has property interest in Medicare payments for services rendered)