272 F. Supp. 3d 103
D.D.C.2017Background
- Delaware’s Medicaid agency netted third-party collections against total Medicaid expenditures because its accounting system could not separately track overpayments owed to the federal government.
- HHS OIG issued reports (2004, 2012) finding Delaware failed to separately report overpayments and identified $10,080,378 allegedly owed to the federal government.
- CMS issued a disallowance equal to that amount; Delaware missed the 60-day statutory reconsideration deadline by about two weeks and later sought a retroactive extension.
- Delaware appealed to the Departmental Appeals Board (DAB/Board) after CMS denied reconsideration; the Board Chair rejected the appeal as untimely and denied an extension.
- Delaware filed suit in the D.D.C. within 60 days of the Board’s rejection, challenging the Board’s rejection as arbitrary and capricious under the Administrative Procedure Act (APA) and asserting equitable common-law claims for unjust enrichment and money had and received.
- The court concluded it had jurisdiction under 42 U.S.C. § 1316(e)(2)(C) to review the Board’s rejection and found Delaware stated a plausible APA claim; it dismissed the common-law claims and CMS/Administrator as to APA counts without prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Board’s rejection letter is a "decision of the Board" subject to judicial review under 42 U.S.C. § 1316(e)(2)(C) | The Rejection Letter is a final Board decision and thus reviewable; Delaware timely filed within 60 days of that decision | The Rejection Letter, issued by the Chair alone, is not a Board "decision" under Board regulations requiring three-member decisions, thus not subject to §1316(e)(2)(C) review | Court held the Rejection Letter is a "decision of the Board" and §1316(e)(2)(C) jurisdictional prerequisites are satisfied; subject-matter jurisdiction exists |
| Whether the Board’s rejection was arbitrary and capricious under the APA | CMS/Board erroneously concluded the reconsideration deadline was jurisdictional and refused to grant an extension for good cause; the actual delay was two weeks, not 15 months | The Board properly denied the extension and rejected the appeal as untimely | Court found Delaware plausibly alleged the Board acted arbitrarily/capriciously and stated a claim under the APA |
| Whether failure to exhaust administrative remedies bars judicial review | Delaware contends it challenged the agency’s refusal to entertain a late reconsideration, which itself is reviewable; exhaustion should not bar the APA claim | Defendants argue Delaware failed to exhaust and missed administrative deadlines, foreclosing review | Court held exhaustion does not bar review of an agency refusal to hear an appeal and rejected the exhaustion defense at the motion-to-dismiss stage |
| Viability of Delaware’s common-law claims for unjust enrichment and money had and received | Delaware seeks equitable relief (and contends money-had-and-received is not purely equitable) for funds improperly retained by the federal government | Defendants assert availability of adequate legal remedies and sovereign immunity precludes money damages | Court dismissed common-law claims without prejudice (equitable relief inappropriate where adequate legal remedy exists) and noted sovereign-immunity/claims-venue issues for money damages |
Key Cases Cited
- Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498 (Medicaid is a cooperative federal-state program)
- Bowen v. Massachusetts, 487 U.S. 879 (procedural description of federal payments and state reporting requirements)
- Athens Cmty. Hosp. v. Schweiker, 686 F.2d 989 (D.C. Cir.) (PRRB refusal to exercise jurisdiction is a final decision reviewable in court)
- Auburn Reg'l Med. Ctr. v. Sebelius, 642 F.3d 1145 (D.C. Cir.) (reaffirming Athens that a board’s jurisdictional dismissal is final and reviewable)
- Sebelius v. Auburn Reg'l Med. Ctr., 568 U.S. 145 (Supreme Court) (statutory appeal deadlines in Medicare context are not jurisdictional; Secretary may extend for good cause)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard for plausible claims)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading must state a plausible claim)