344 F. Supp. 3d 1192
D. Nev.2018Background
- Dr. Odell, a Nevada physician, provides a routine treatment (nerve blocks plus electrical stimulation) for neurological ischemia affecting lower extremities; he alleges hundreds of Medicare claims for that treatment have been denied and later recouped by RAC audits.
- Noridian, the local Medicare Administrative Contractor (MAC), allegedly applies an "unwritten rule" that classifies Odell's procedures under Noridian LCD L28271 and presumptively denies coverage, rather than under LCD L28240 (which more broadly covers nerve blocks).
- ALJ Wein reversed denials for 13 of 15 consolidated appeals, finding LCD L28240 applicable and Odell’s documentation sufficient for most claims; Noridian did not appeal that ALJ decision.
- Odell cannot challenge LCDs directly as a supplier (only beneficiaries may be "aggrieved parties" to challenge an LCD under 42 U.S.C. §1395ff(f)(2)); he contends piecemeal administrative appeals are futile given Noridian’s blanket practice.
- Odell sued seeking declaratory and injunctive relief (no retroactive monetary relief); District Court denied Noridian’s Rule 12(b)(6) dismissal and granted a preliminary injunction, allowing jurisdictional exhaustion to be waived under Ninth Circuit precedent.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal jurisdiction exists despite Medicare exhaustion requirement | Odell: his claims are collateral to benefits claims, irreparable, and administrative exhaustion is futile because suppliers cannot obtain agency-wide review and Noridian applies a default rule | Noridian: review must proceed through §1395ff exhaustion; federal-question jurisdiction is disclaimed by §405(h) | Court: jurisdiction proper — exhaustion waived (collateral, colorable irreparable harm, futility shown) |
| Whether Odell sufficiently alleged existence of an "unwritten rule" (failure to state a claim) | Odell: testimony and documents show Noridian's policy to classify his treatment under LCD L28271 and automatic denials | Noridian: allegations are conclusory and lack evidence | Court: allegations supported by testimony and documents; complaint survives dismissal (no ruling on merits) |
| Likelihood of success on merits for preliminary injunction (APA/arbitrary-and-capricious / rulemaking) | Odell: default application of L28271 to his treatment is arbitrary/capricious and may constitute an unwritten substantive rule that bypassed notice-and-comment | Noridian: MACs may promulgate and apply LCDs and are not bound by nonprecedential ALJ decisions | Court: Odell likely to succeed — ALJ opinion and LCD text support conclusion that L28240 is the proper LCD and Noridian’s blanket application is suspect |
| Need and scope of preliminary relief | Odell: ongoing audits and recoupments cause irreparable financial, reputational, and patient-access harms; balance tips to him | Noridian: (implicitly) interest in efficient LCD use and recovery of improper payments | Court: preliminary injunction appropriate; ordered parties to propose specific injunctive orders and set hearing to determine scope |
Key Cases Cited
- Heckler v. Ringer, 466 U.S. 602 (1984) (Medicare claims judicial review is governed by §405(g) to the exclusion of general federal-question jurisdiction)
- Shalala v. Illinois Council on Long Term Care, 529 U.S. 1 (2000) (tests scope of "arising under" for Medicare jurisdiction)
- Weinberger v. Salfi, 422 U.S. 749 (1975) (constitutional challenges may still "arise under" the Social Security/Medicare statutes)
- Johnson v. Shalala, 2 F.3d 918 (9th Cir. 1993) (three-part test for waiving administrative exhaustion: collaterality, irreparability, futility)
- Winter v. Natural Resources Defense Council, 555 U.S. 7 (2008) (standard for preliminary injunctions)
- Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127 (9th Cir. 2011) ("serious questions" alternative test for preliminary injunction)
- Erringer v. Thompson, 371 F.3d 625 (9th Cir. 2004) (LCDs binding only on the MAC that issued them and not binding on ALJs or federal courts)
- Califano v. Sanders, 430 U.S. 99 (1977) (APA is not an independent grant of subject-matter jurisdiction)