A1 DIABETES & MEDICAL SUPPLY, Plaintiff-Appellee, v. ALEX M. AZAR II, Secretary for the United States Department of Health and Human Services; SEEMA VERMA, Administrator for the Centers for Medicare and Medicaid Services, Defendants-Appellants.
No. 18-6303
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
August 22, 2019
19a0208p.06
RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit I.O.P. 32.1(b). Appeal from the United States District Court for the Western District of Tennessee at Memphis. No. 2:18-cv-02612—John Thomas Fowlkes, Jr., District Judge. Argued: August 8, 2019.
COUNSEL
ARGUED: Joshua M. Salzman, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellants. Jonathan E. Nelson, BASS, BERRY & SIMS PLC, Memphis, Tennessee, for Appellee. ON BRIEF: Joshua M. Salzman, Rachel F. Homer, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellants. Jonathan E. Nelson, John S. Golwen, BASS, BERRY & SIMS PLC, Memphis, Tennessee, Parker D. Eastin, NICHOLSON & EASTIN, LLP, Fort Lauderdale, Florida, for Appellee.
SUTTON, Circuit Judge. In 2017, A1 Diabetes & Medical Supply learned that government auditors thought that the company had overcharged a federal agency by several million dollars for services provided to Medicare beneficiaries. A1 challenged the auditors’ decisions at two levels of the Medicare appeals process but changed the auditors’ minds only in a few minor ways. The government tried to start collecting the money, as the regulatory regime allows. Fearing bankruptcy from the government‘s recoupment efforts, A1 sought and received a preliminary injunction from a federal district court, barring the government from recouping the money until A1 received a hearing before an administrative law judge.
Even though A1 did not proceed to the third and fourth levels of the administrative appeal, the district court and we have jurisdiction over A1‘s constitutional claims. At the same time, the appellate briefs and oral argument have identified several factual and legal points on the merits that warrant clarification below. We therefore vacate the district court‘s order and remand the case for brief proceedings to address these questions.
I.
A federal health insurance program, Medicare makes sure that the elderly and disabled have access to medical care. The program depends on a lot of entities to make sure that beneficiaries get the help they need. One group of entities, medical services companies like A1, provide beneficiaries or their doctors with medical equipment. In exchange for their work, the government reimburses these companies.
Companies submit claims detailing how much they‘re owed, and the government usually approves them. To make sure it doesn‘t overpay, the government hires other companies to audit the payments. When an auditor believes that a company has overcharged, it sends a demand letter to the company for the amount owed. Sometimes the company pays. Other times it challenges the decision.
If the provider challenges the decision, it may appeal the decision through four levels of administrative review. At the first two levels of review, called the “redetermination” and “reconsideration” stages of the process, a provider submits written evidence to a new auditor who reviews the original auditor‘s ruling. The reviewer must explain in writing why it agrees or disagrees with the initial auditor.
The statute contains a hardship exception. It permits the government to offer payment plans to providers who demonstrate that repayment within thirty days (the default time period) would pose a challenge.
Even as the government recoups overpayments, a provider may appeal the second-level administrative decision to the third tier of review, where an ALJ holds a hearing on the dispute.
One other feature of the administrative review process deserves mention. If the third and fourth layers of review take too long (more than ninety days each), the provider may go directly to district court to challenge the administrative decision on the existing record.
According to the auditors, A1 owes the government quite a bit of money. All told, A1 allegedly overcharged the government around $7 million. After receiving the demand letters, A1 appealed all of them through the first and second levels of administrative review. The reviews reduced in small part the amount A1 had to pay back. In August 2018, A1 submitted requests for an ALJ to review the remaining overpayment decisions but learned that the wait for a hearing would likely be three to five years, not ninety days. A1 felt it could not wait that long. According to A1, 90% of its revenue comes from government reimbursements such as the ones at issue. The government collects most recoupments by deducting the amounts owed to the provider due to new reimbursements based on new services.
Notably, however, A1 did not invoke the escalation procedures allowing it to go to district court to obtain immediate review of the first and second layers of the administrative review process. It instead filed a complaint that this administrative process—particularly the denial of a prompt ALJ hearing and decision—violated its due process rights. A1 sought a preliminary injunction to prevent the government from recovering the amounts A1 owed until A1
II.
We start with a jurisdictional question. Ever since the U.S. Supreme Court‘s decision in Arbaugh, the Court has brought more discipline to delineating the statutory requirements for filing a lawsuit in federal court that amount to non-forfeitable (and non-waivable) jurisdictional imperatives and those requirements that amount to forfeitable (and waivable) claim-processing rules. Arbaugh v. Y&H Corp., 546 U.S. 500 (2006). The Arbaugh test is easy to describe: A statutory requirement goes to the subject matter jurisdiction of the federal courts “[i]f the Legislature clearly” says it does. Id. at 515. The test is not always easy to apply.
Seeking federal court review of a Medicare appeal is not for the jurisdictionally faint of heart. District courts typically have jurisdiction to hear cases involving a federal statute, like the Medicare Act, by virtue of
Section 405(g) requires the “Secretary“—the Secretary of Health and Human Services—to make a “final decision” on the claim before a district court has jurisdiction to review any challenge to the administrative decision.
Cue Mathews v. Eldridge, which suggests that § 405(g)‘s exhaustion requirement is not a jurisdictional prerequisite for review in federal court. 424 U.S. 319, 331 (1976). The Court assessed a claim that looked like this one in many ways: a constitutional due process challenge to a request for disability benefits lingering in the halls of the agency‘s appeals process. The Court held that a district court has jurisdiction under § 405(g) to hear a constitutional challenge related to a claim for benefits as long as the party initially presented the claim to the relevant agency. Section 405(g), the Court explained, “consists of two elements, only one of which is purely ‘jurisdictional’ in the sense that it cannot be ‘waived’ . . . . The non-waivable element is that a claim
Two other considerations deserve mention. One is that Mathews was decided in 1976, long before the Court (often through the leadership of Justice Ginsburg) began to bring discipline to this area. But that reality does not alter our conclusion. There is no clear statement in the relevant statute that the Mathews approach overlooks. If anything, recent decisions have made subject matter jurisdiction limitations harder to find.
The other consideration is a qualification—that the administrative review regime at issue in Mathews differs from this one. Mathews looked at the review process for disability benefits that Social Security provides. At the time, the Social Security Administration had complete authority to decide by regulation what the Social Security review process would entail. See Weinberger v. Salfi, 422 U.S. 749, 766 n.9 (1975). Congress codified the current four-layer review process for Medicare in 2000 through the Medicare, Medicaid and SCHIP Benefits Improvement Protection Act. Even though § 405(g) grants jurisdiction over claims arising under either statutory scheme, the Medicare Act does not grant the Secretary of Health and Human Services the authority to construct an administrative appeals process for Medicare as he or she sees fit. See
All in all, A1 has complied with
Jurisdiction exists. That leaves the merits.
III.
In gauging requests for a preliminary injunction, district courts look at four factors: (1) the plaintiff‘s likelihood of success on the merits; (2) the risk of irreparable harm to plaintiffs absent injunctive relief; (3) the risk of harm to others resulting from an injunction; and (4) the broader public interest. Mich. State AFL–CIO v. Schuette, 847 F.3d 800, 803 (6th Cir. 2017). In reviewing such decisions, courts of appeals ask two questions: (1) Did the district court rely on clearly erroneous facts in assessing these considerations? And (2) did the court rely on an incorrect legal standard or misapply the governing standard in assessing these considerations? Id. This case turns on the law—and A1‘s likelihood of success on its due process claim.
The Fifth Amendment prohibits the federal government from depriving any person “of life, liberty, or property, without
Let us take for granted that A1 identified a protected “property” interest. Some courts, it‘s true, have raised doubts about whether a Medicare service provider has any property interest in getting paid for what it provides. See PHHC, LLC v. Azar, No. 18-cv-1824, 2018 WL 5754393, at *8 (N.D. Ohio Nov. 2, 2018); Alpha Home Health Sols., LLC v. Sec‘y of U.S. Dep‘t of Health & Human Servs., 340 F. Supp. 3d 1291, 1303 (M.D. Fla. 2018). Other courts have found a valid property interest. See Angels of Care Home Health Inc. v. Azar, No. 3:18-CV-3268-S-BK, 2019 WL 1101286, at *2 (N.D. Tex. Feb. 13, 2019); Med-Cert Home Care, LLC v. Azar, 365 F. Supp. 3d 742, 751 (N.D. Tex. 2019); Accident, Injury & Rehab., PC v. Azar, No. 4:18-cv-02173-DCC, 2018 WL 4625791, at *7 (D.S.C. Sept. 27, 2018). But we need not resolve the point today. We will assume for now that A1 has a property interest in getting paid for its equipment and services.
Mathews v. Eldridge, once again, enters the picture. It tells us to balance four factors in deciding what process A1 deserves: “[1] the private interest that will be affected by the official action; . . . [2] the risk of an erroneous deprivation[;] . . . [3] the probable value, if any, of additional or substitute procedural safeguards; and . . . [4] the Government‘s interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.” 424 U.S. at 335.
Two of the Mathews factors—the first and fourth—are relatively straightforward to apply here. As to the first one, A1 plainly has a significant “private interest“: payment for services rendered. It‘s difficult for a company to stay in business without fresh revenue. As this case comes to us, the company already has laid off 25 people. And nearly 50 others will lose their jobs if A1 enters bankruptcy—which A1 claims is inevitable if the government may deduct all new reimbursement payments against the $7 million in recoupment payments now due. The future viability of a company—not to mention (though just mentioned) the jobs it sustains—hinges on whether it gets new reimbursements for new services provided. It‘s true that this money may look less important than other money subject to claims like this one—whether successful claims, see Goldberg v. Kelly, 397 U.S. 254, 264 (1970) (identifying government welfare benefits as “the very means by which to live“), or unsuccessful claims, see Mathews, 424 U.S. at 340 (recognizing that the private interest in disability benefits is not so significant that a pre-termination hearing is necessary). But we must look at A1‘s “private interest” in part through its eyes, not exclusively through others’ eyes. And there is plenty to appreciate from A1‘s vantage point.
The fourth factor, by contrast, cuts in favor of the government. It seeks to recover on a timely basis millions of dollars that several government auditors agree it is owed and that two independent layers of administrative review confirm it is owed. This agency, like every federal agency, has ample reason to ensure that it does not waste the people‘s money. Just as the people‘s resources are finite, so are the government‘s. Delayed recoupment of over-billing puts Medicare at risk, and other government programs too.
Our resolution of the second and third factors is another matter. Both considerations remain clouded by a few questions
The record, for one, remains unclear about A1‘s choice not to take advantage of the escalation option. By statute, if an ALJ does not provide A1 its hearing and decision in ninety days, A1 may escalate its claim to the fourth and final level of administrative review—and then to district court review if the same problem raises its head.
Escalation, it‘s true, requires a party to forgo the right to a live hearing at the third level of the process. Absent the ALJ hearing, it‘s also true, the district court will be limited to the written administrative record, leaving A1 without the chance to cross-examine the government‘s statisticians. But these answers, too, leave questions. The Medicare Act generally requires that a provider who challenges an auditor‘s decision to submit all evidence in its favor before it reaches the third layer of review. See
Finally, we have unanswered questions regarding the statistics concerning the relief likely to be obtained at the third level of administrative review. In particular, how often does an entity obtain substantial relief at level three over any relief that it obtained at level two? And how should we account for the high rate of dismissals at level three?
To the end of answering these questions, we vacate the district court‘s order granting A1 a preliminary injunction and remand the case to the district court. On remand, the court is free to maintain the status quo by reissuing a temporary restaining order and other preliminary relief while the parties respond promptly to these (and any other relevant) questions. After obtaining this information, the district court remains free to reach the same or a different conclusion—and to explain how this new information either does or does not alter its initial conclusion. Once the parties and the court promptly complete that process, the losing party may appeal the district court‘s order on an expedited basis to this panel. At that point, we will decide whether additional briefing and oral argument are necessary.
We vacate the district court‘s order and remand for proceedings consistent with this opinion.