Personal Care Products, Inc. v. Albert Hawk
635 F.3d 155
| 5th Cir. | 2011Background
- PCP supplied incontinence products to Medicaid recipients in twelve states, including Texas.
- Texas Health and Human Services Commission withheld Medicaid payments during an investigation of PCP’s billing and alleged overpayments for 2004–2005.
- PCP sought a hearing and attempted to contest the hold, but could not challenge merits until amounts were final.
- In Oct 2006 a potential overpayment of ~$4M and additional penalties were identified; a 25% hold followed after PCP refused to provide a security interest.
- PCP filed suit under 42 U.S.C. § 1983 alleging due process violations; district court dismissed for lack of a property interest in reimbursements.
- The Fifth Circuit affirmed, holding PCP had no property interest in payments pending a fraud investigation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does PCP have a property interest in Medicaid reimbursements withheld during investigation? | PCP argues it has a legitimate entitlement to current, uninvestigated payments. | Texas law/regulations permit withholding current payments pending investigation and do not create a property right. | No property interest; dismissed. |
| May a state withhold future payments pending fraud investigation without violating due process? | Hold violates due process by depriving current funds without adjudicated fraud. | Regulatory framework allows holds to recoup overpayments and offset penalties; no entitlement to withheld funds. | Permissible under state and federal framework. |
| Are federal regulations or state law constraints on payment holds sufficient to create a due process right? | Regulations guidance could imply a protected property interest. | Neither creates entitlement to funds under investigation. | No entitlement; no due process violation. |
Key Cases Cited
- Bd. of Regents of State Colleges v. Roth, 408 U.S. 564 (U.S. 1972) (property interests require legitimate entitlement, not mere expectation)
- Yorktown Med. Lab. v. Perales, 948 F.2d 84 (2d Cir. 1991) (provider has no property interest in payment pending investigation; may withhold for cause)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading standard for plausibility)