975 F.3d 523
5th Cir.2020Background
- Sahara Health Care, a home-health provider receiving ~75% of revenue from Medicare, was audited and assessed approximately $3.6M in overpayments, later reduced to ~$2.4M after two administrative levels.
- Sahara timely requested an ALJ hearing, which by statute must be decided within 90 days; due to an OMHA backlog, ALJ waits were typically 3–5 years.
- Medicare regulations prohibit recoupment during the first two administrative stages but permit recoupment after step two; Congress provided an escalation remedy to the Appeals Board (and ultimately judicial review) when ALJs miss deadlines.
- Sahara sought a temporary restraining order and injunctive relief in federal court to stop recoupment until it received an ALJ hearing, alleging procedural due process violations and that the Secretary acted ultra vires.
- The district court dismissed Sahara’s complaint; the Fifth Circuit affirmed, holding Sahara received constitutionally adequate process and the agency acted within statutory authority.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether recoupment without a timely ALJ hearing violates procedural due process | Sahara: recoupment began before ALJ hearing, depriving it of property without meaningful hearing | HHS: Sahara got notice plus two written, reasoned reviews; Congress provided escalation to Appeals Board and judicial review | Court: Due process satisfied under Mathews balancing; Sahara failed to show additional ALJ hearing would materially reduce risk of erroneous deprivation |
| Whether recoupment before an ALJ decision is ultra vires | Sahara: agency lacked statutory authority to recoup before ALJ decision | HHS: statute forbids recoupment only during steps 1–2; after step two recoupment is authorized and escalation remedy exists | Court: Agency acted within statutory authority; ultra vires claim dismissed |
| Value of an ALJ live hearing (cross-examination, witnesses) given closed record rules | Sahara: ALJ hearing provides essential safeguards (live testimony, cross-exam) that written reviews cannot | HHS: ALJ hearings cannot expand the record absent good cause; subpoenas and compulsory testimony are limited; escalation yields de novo Appeals Board review | Court: Sahara didn’t identify any material credibility or factual disputes the ALJ would resolve; hearing would likely add little; argument fails |
| Entitlement to injunctive relief vs. statutory escalation remedy | Sahara: injunction needed to prevent irreparable harm (business closure) | HHS: Sahara could have escalated to Appeals Board (180-day decision) and then sought judicial review; choosing not to escalate undermines equitable relief | Court: Denial of injunctive relief affirmed; Sahara cannot complain after rejecting statutory remedies |
Key Cases Cited
- Mathews v. Eldridge, 424 U.S. 319 (1976) (framework for procedural due process balancing)
- Am. Hosp. Ass'n v. Burwell, 812 F.3d 183 (D.C. Cir. 2016) (mandamus discussion re: OMHA backlog)
- Accident, Injury & Rehab., PC v. Azar, 943 F.3d 195 (4th Cir. 2019) (rejecting injunction to bar recoupment where administrative escalation existed)
- Cumberland Cty. Hosp. Sys., Inc. v. Burwell, 816 F.3d 48 (4th Cir. 2016) (describing OMHA backlog)
- Family Rehab., Inc. v. Azar, 886 F.3d 496 (5th Cir. 2018) (collateral-claim exception to Medicare exhaustion)
- Pers. Care Prods., Inc. v. Hawkins, 635 F.3d 155 (5th Cir. 2011) (rejecting property-interest theory for current Medicaid reimbursements)
- Gilbert v. Homar, 520 U.S. 924 (1997) (importance of risk-of-erroneous-deprivation factor in Mathews)