349 F. Supp. 3d 555
S.D. Tex.2018Background
- Sahara Health Care, a Medicare-certified home health provider, was notified of an extrapolated overpayment after a ZPIC post-payment review covering 2013–2016; initial overpayment ~ $3.6M later revised to ~$2.4M (plus interest).
- Sahara pursued redeterminations and a QIC reconsideration (first two administrative levels); after the QIC decision Sahara timely requested an ALJ hearing (third level), triggering a statutory 90‑day target for an ALJ decision, but OMHA backlog projected a multi‑year wait.
- The MAC began statutory recoupment/offset activity after QIC reconsideration and demand letters; Sahara sought a 300‑month extended repayment schedule, which MAC said it could not approve (statutory cap at 60 months).
- Sahara filed suit seeking to enjoin recoupment as violating due process, alleging ultra vires action and an APA "preservation of rights" claim, and moved for TRO / preliminary injunction.
- Defendants moved to dismiss for lack of jurisdiction and failure to state a claim; recoupment commenced during litigation. The Court denied leave to amend, found limited jurisdiction, dismissed claims as explained, and denied injunctive relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject‑matter jurisdiction under Medicare collateral‑claim exception | Exhaustion should be excused because recoupment before an ALJ hearing is a collateral claim and relief at the end of appeals would be inadequate (irreparable harm) | §405(g)/(h) channels review to agency; collateral exception inapplicable to APA claim | Court: collateral‑claim exception applies only to procedural due process and ultra vires claims; APA claim lacks jurisdiction (dismissed without prejudice) |
| Procedural due process: entitlement to pre‑recoupment evidentiary ALJ hearing | Sahara: recoupment before an ALJ hearing (given OMHA backlog) deprives Sahara of property and business without due process; seeks injunction to suspend recoupment | HHS/CMS: statutory scheme permits recoupment after levels 1–2; providers have multiple pre‑recoupment opportunities and ERS; no constitutional right to immediate evidentiary ALJ hearing | Court: Sahara lacks a protected property interest in alleged Medicare overpayments; Eldridge balancing favors government; due process claim fails — dismissed with prejudice |
| Ultra vires claim (recoupment beyond authority) | Sahara: recoupment amid ALJ backlog and premature collection exceeds statutory/constitutional limits and is ultra vires | Defendants: actions are consistent with statute and regulations; claim is conclusory | Court: pleadings are conclusory and insufficient; ultra vires claim dismissed without prejudice |
| APA claim as independent basis for review | Sahara: invoked APA to "preserve rights" and challenge recoupment | Defendants: APA does not provide independent jurisdiction to circumvent §405(g)/(h) exhaustion | Court: APA not available to bypass Medicare exhaustion; APA claim dismissed without prejudice |
Key Cases Cited
- Family Rehab., Inc. v. Azar, 886 F.3d 496 (5th Cir. 2018) (recognizes collateral‑claim exception to §405(g) for procedural due‑process and ultra vires claims)
- Mathews v. Eldridge, 424 U.S. 319 (1976) (framework for procedural due‑process balancing)
- Smith v. N. Louisiana Med. Review Ass'n, 735 F.2d 168 (5th Cir. 1984) (no reasonable entitlement to payment on a bad Medicare claim; no protected property interest)
- Pers. Care Prods., Inc. v. Hawkins, 635 F.3d 155 (5th Cir. 2011) (no protected property interest in Medicaid/Medicare payments withheld pending investigation)
- Heckler v. Ringer, 466 U.S. 602 (1984) (limits on judicial review of agency action where Congress provided an alternative review scheme)