Ancillary Affiliated Health Services, Incorporated, a Wisconsin Business Corporation v. Donna E. Shalala, Secretary, Department of Health
165 F.3d 1069
7th Cir.
1999
Check Treatment
MANION, Circuit Judge.

Anсillary Affiliated Health Services (“Ancillary”) sought an injunction against the Secretary of Health and Human Services, compеlling her to make Medicare reimbursement payments, which the Secretary had ordered withheld because of an overpayment to Ancillary. The district court dismissed the ease for lack of jurisdiction, holding that Ancillary was required to exhaust its administrative remedies before it could sue in federal district court. Ancillary appeals; we affirm.

Ancillary provides home health services for Medicare beneficiaries, and is reimbursed by the federal government. In June 1997, United Government Services (“UGS”), which administers the reimbursement plan for the federal government, informed Ancillary that in 1996 Ancillary had been overpaid by $183,-237. Ancillary рroposed that it repay this *1070 money over eighteen months: $6,300 would be withheld from the approximately $150,000 which the federal gоvernment paid Ancillary every month. UGS forwarded this proposal to the United States Health Care Financing Administration (“HCFA”), and while a response was pending, began withholding the $6,300.

On November 3, 1997, UGS notified Ancillary that the proposed repayment schedule had been rejected by HCFA and ‍‌‌​​​​‌‌​​‌‌​​‌​​‌​​‌​​​​‌‌​‌‌​‌​​​​​‌‌‌​​​‌​‌‌‌‍that UGS would withhold all payments until the entire $183,237 had been recouped. On November 10, UGS withheld 100% of Ancillary’s еxpected payment. Then on November 14, one of Ancillary’s two owners, Edith Polzin, pleaded guilty to conspiring to defraud thе Medicare program, and nine days later the other owner, Barbara Stefonek, was convicted of the same charges by a jury. Upon the conviction of Polzin, HCFA ordered UGS to cease all payments to Ancillary because of the fraud, but Ancillary did not learn of this until November 21. Rather, three days earlier, Ancillary filed suit in the Eastern District of Wisconsin seeking to cоmpel HCFA to continue payments under the proposed recoupment scheme, whereby only $6,300 would be withheld every month.

Ancillary did not contest the suspension of payments due to fraud (either before the district court or this court), but it does assert that HCFA was obligated to make the November 10 payment of approximately $40,-000, because HCEA failed to give Ancillary fiftеen days to respond before suspending the November 10 payment. 1 HCFA contended before the district court that Ancillary had failed to exhaust its administrative remedies, and therefore the district court lacked subject matter jurisdiction. The magistrate judge agreed with HCFA and recommended dismissal of the suit. The district court adopted the magistrate judge’s recommendation, аnd dismissed the case.

In this appeal, Ancillary asserts that it did not have to exhaust its administrative remedies, or alternatively, that it met an exception to the exhaustion requirement, thus giving the district court ‍‌‌​​​​‌‌​​‌‌​​‌​​‌​​‌​​​​‌‌​‌‌​‌​​​​​‌‌‌​​​‌​‌‌‌‍subject matter jurisdiction. Section 405(h) of Title 42 of the United States Code precludes federal question jurisdiction for a “claim arising under” the Medicare Act, except as provided in § 405(g). 2 A claim “arises under” the Medicare'Act “‘when both the standing and the substantive basis for the presentation’ of the claims” stem from the Medicare Act. Heckler v. Ringer, 466 U.S. 602, 615, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984) (quoting Weinberger v. Salfi, 422 U.S. 749, 760-61, 95 S.Ct. 2457, 45 L.Ed.2d 522 (1975)).

Ancillary first asserts that it challenges under the Due Process Clause only the procedure usеd by HCFA, not the substance or merits of its decision. However, the Supreme Court in Ringer rejected just such an argument: “The inquiry in determining whether § 405(h) bаrs federal-question jurisdiction must be whether the claim ‘arises under’ the Act, not whether it lends itself to a ‘substantive’ rather than a ‘procedural’ label.” Id. at 614-15, 104 S.Ct. 2013 (citing Mathews v. Eldridge, 424 U.S. 319, 327, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976)). Similarly, in Homewood Professional Care Center Ltd. v. Heckler, 764 F.2d 1242, 1253 (7th Cir.1985), we held that “the Medicare Act clearly requires the presentation of all disputes including any and аll constitutional questions to the Board.” Thus, even characterizing ‍‌‌​​​​‌‌​​‌‌​​‌​​‌​​‌​​​​‌‌​‌‌​‌​​​​​‌‌‌​​​‌​‌‌‌‍Ancillary’s claim as a due process claim does nоt relieve Ancillary of its obligation to exhaust its administrative remedies under the facts presented in this case. Compare, Mathews, 424 U.S. at 330-32, 96 S.Ct. 893.

*1071 Ancillary also characterizes its claim as one “wholly collateral” to a claim for reimbursement under the Medicare Act, аnd therefore, one which does not “arise under” the Medicare Act. This exception to the exhaustion requirement was recognized by the Supreme Court in Ringer, 466 U.S. at 618, 104 S.Ct. 2013. We fail to see how Ancillary’s claim, which is premised on monies allegedly due under the Medicare Act and relies on administrative regulations pertaining to Medicare, is wholly collateral to the Medicare Act. Rather, we see Ancillary’s claim as a claim for reimbursement, and in Homewood we found that such a claim arose under the Medicare Act. 764 F.2d at 1249 (“Homewood’s claim that the individual defendants wrongfully continue to withhold funds due them is, in effect, a claim for payment under the Act.... Because attempts to expedite recovery under the Act arise under the Act, these claims are barred from the federal courts” until the Secretary has issuеd a final decision). We see no meaningful distinction between Homewood’s claim that the defendants wrongfully withheld funds, and Ancillary’s сlaim that the Secretary failed to issue a notice required by her regulations. Both claims seek to recover funds under thе Act; both claims involve alleged due process violations. Accordingly, we hold that Ancillary’s claim arises under the Medicare Act, and therefore, it must obtain a final decision from the Secretary before suing in federal court.

Ancillary agrees that if its claim for benefits is not “‘collateral’ to a claim for Medicare benefits,” then “Judge Curran’s decision is correct.” Appellant’s Reply Br. at 5. Ancillary’s claim is a claim for reimbursement which arises ‍‌‌​​​​‌‌​​‌‌​​‌​​‌​​‌​​​​‌‌​‌‌​‌​​​​​‌‌‌​​​‌​‌‌‌‍under the Medicare Act. For these rеasons and for the reasons set forth in the opinion of the district court and the recommendations of the magistrate judge, we ApfiRM the dismissal of this case for lack of subject matter jurisdiction.

Notes

1

. See 42 C.F.R. § 405.371(a). The 15-day notice requirement, contained in § 405.375(a), is inсorporated into § 405.371(a) by virtue of § 405.373(c). UGS initially gave Ancillary a 15-day notice in June 1997. We express no opinion as to whethеr Ancillary was entitled to another 15-day notice period.

2

. 42 U.S.C. § 1395Ü renders § 405(h) applicable to the Medicare Act. Cf. Illinois Council on Long Tern Care, Inc. v. Shalala, 143 F.3d 1072, 1075 (7th Cir.1998) ("§ 1395Ü doеs not affect regulatory challenges that are detached from any request for reimbursement.”) (citing McNary v. Haitian Refugee Center, Inc., 498 U.S. 479, 497-98, 111 S.Ct. 888, 112 L.Ed.2d 1005 (1991)). As Ancillary’s claim is clearly attached to a request for ‍‌‌​​​​‌‌​​‌‌​​‌​​‌​​‌​​​​‌‌​‌‌​‌​​​​​‌‌‌​​​‌​‌‌‌‍reimbursement, there is no question that § 1395Ü applies.