SAHARA HEALTH CARE, INCORPORATED, Plaintiff—Appellant, v. ALEX M. AZAR, II, SECRETARY, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES; SEEMA VERMA, ADMINISTRATOR FOR THE CENTERS FOR MEDICARE AND MEDICAID SERVICES, Defendants—Appellees.
No. 18-41120
United States Court of Appeals for the Fifth Circuit
September 18, 2020
Appeals from the United States District Court for the Southern District of Texas, USDC No. 7:18-CV-203
Before ELROD, WILLETT, and OLDHAM, Circuit Judges.
Congress devised an intricate procedure for medical providers to dispute Medicare recoupment: four layers of administrative review, followed by review in a federal court. But over a period of five years, administrative appeals for Medicare recoupment grew twelve-fold. At its peak, the backlog of appeals grew to a ten-year wait. This logjam resulted in a remarkable opinion by the D.C. Circuit, in which that court told Congress that it would likely mandamus the Secretary of Health and Human Services if the political branches “failed to make meaningful progress within a reasonable period of time—say, the close of the next full appropriations cycle.” See Am. Hosp. Ass‘n v. Burwell, 812 F.3d 183, 193 (D.C. Cir. 2016). As they say, the best laid plans of mice and men oft go awry.1
Sahara Health Care is a provider stuck in this bureaucratic mire. The government told Sahara that past Medicare reimbursements had been overpaid and were ripe for recoupment. After step two of the four-step administrative review process (with fifth-step judicial review), HHS began to recoup overpayments from Sahara‘s present and future reimbursements. Although the statute requires an ALJ hearing and decision within 90 days of a request, the current ALJ backlog results in a typical three-to-five year wait.
Sahara sought injunctive relief, asserting that its statutory and due process rights were violated and that the government acted ultra vires by recouping payments without providing a timely ALJ hearing. The district court granted the government‘s motion to dismiss, holding alternatively that Sahara lacked a protected property interest in forestalling the recoupment and that the government had provided adequate process. It also concluded that the government had not exceeded its statutory authority. Because we agree that the government provided Sahara adequate process and complied with the statute, we AFFIRM.
I.
The Medicare program processes over a billion claims each year. CTRS. FOR MEDICARE & MEDICAID SERVS., The Medicare Recovery Audit Contractor (RAC) Program: An Evaluation of the 3-Year Demonstration at 9 (2008). It cannot inspect each claim as it comes. Instead, it generally pays facially valid claims, and conducts post-payment audits to detect overpayments. See
Sahara Health Care is a home health agency that depends on Medicare reimbursements for about 75% of its revenue. In 2017, a Medicare contractor audited a sample of Sahara‘s claims and, after analysis and extrapolation, calculated that HHS had overpaid it about $3.6 million. The government wanted that money back. Sahara objected. After two levels of administrative review, Sahara had successfully reduced that number down to about $2.4 million (excluding interest). Sahara believed that was still excessive. It exercised its statutory right to an ALJ hearing within 90 days of a request. Unfortunately for Sahara, the massive administrative backlog resulted in a three-to-five year wait for a hearing. See Cumberland Cty. Hosp. Sys., Inc. v. Burwell, 816 F.3d 48, 50–51 (4th Cir. 2016). This case arises from the conflict between the statutory right to a hearing within 90 days and the administrative reality that no such hearing occurs for years.
A.
The first phase of administrative review is a “redetermination” from an HHS contractor. See
At step three, a provider is entitled to a hearing and decision from an ALJ, who must “render a decision on such hearing by not later than the end of the 90-day period” after the request was timely filed.
In the case of a failure by an administrative law judge to render a decision by the end of the period described in paragraph (1), the party requesting the hearing may request a review by [the HHS Appeals Board] notwithstanding any requirements for a hearing for purposes of the party‘s right to such a review.
The Appeals Board then has 90 days to conduct a de novo review and issue a decision, or 180 days if the case was “escalated” to skip the step-three hearing.
B.
Recoupment is “the recovery by Medicare of any outstanding Medicare debt by reducing present or future Medicare payments and applying the amount withheld to the indebtedness.”
If repayment of an overpayment would constitute an “extreme hardship, as determined by the Secretary,” the agency “shall enter into a plan with the provider” for repayment “over a period of at least 60 months but . . . not longer than 5 years.”
C.
A years-long administrative logjam helps explain why Sahara filed this lawsuit. Between 2009 and 2014, the number of ALJ appeals increased more than 1,200 percent. OMHA, HHS, Fiscal Year 2017 Justification of Estimates for Appropriations Committee 8 (FY 2017 Budget). The agency‘s budget did not receive a similar increase. Cases piled up. At its peak in 2016, HHS had almost ten years of appeals pending. See Cumberland Cty. Hosp., 816 F.3d at 50-51. The agency has since received a funding increase, and currently expects to clear the backlog by 2022. See Am. Hosp. Ass‘n v. Azar, No. 14-cv-851, 2018 WL 5723141 (D.D.C. Nov. 1, 2018). In fact, the Secretary is under a mandamus order requiring such a timetable. See id. at *1. But 2022 is still a ways off, and multi-year waits are abundant.
D.
Sahara was notified of a $3.5 million overpayment determination in February 2017. It appealed. At step one (“redetermination“), after multiple requests and corrected decisions, the overpayment determination was partially upheld. Sahara went to step two (“reconsideration“), and ultimately received a revised overpayment demand of $2.4 million in July 2018. In June 2018, Sahara timely requested an ALJ hearing.2 The next month, it requested an extended repayment schedule to pay down the debt over ten years. The agency denied the request, noting that it lacked statutory authority to extend schedules longer than five years. Sahara was financially unable to accept a five-year plan, which “would have had a devastating impact on
Four days after it requested an ALJ hearing, Sahara filed a lawsuit for injunctive relief in the Southern District of Texas. The district court granted the government‘s motion to dismiss and denied Sahara‘s motions for a preliminary injunction and temporary restraining order. The district court held that Sahara had no protected “property interest in the recoupment or forestalling of the recoupment.” The claim also failed, the district court concluded, because Sahara received constitutionally adequate process. Finally, the district court dismissed the ultra vires claim, explaining that Sahara asserted “only conclusory statements” and that Medicare‘s “backlog argument falls outside the Court‘s jurisdiction.” Sahara appealed.
II.
“This court reviews a district court‘s decision to dismiss under rule 12(b)(6) de novo.” O‘Daniel v. Indus. Serv. Sols., 922 F.3d 299, 304 (5th Cir. 2019). Accepting the plaintiff‘s factual allegations as true, those facts must state a claim that is plausible on its face. Bowlby v. City of Aberdeen, 681 F.3d 215, 219 (5th Cir. 2012).
To be entitled to a preliminary injunction, Sahara must demonstrate that: (1) it is substantially likely to succeed on the merits of its claim; (2) it will suffer irreparable injury in the absence of injunctive relief; (3) the balance of the equities tips in its favor; and (4) the public interest is served by the injunction. Opulent Life Church v. City of Holly Springs, 697 F.3d 279, 288 (5th Cir. 2012). We review the denial of injunctive relief for abuse of discretion. Id.
We have jurisdiction under the collateral-claim exception to the Medicare Act‘s administrative exhaustion requirement. See Family Rehab., Inc. v. Azar, 886 F.3d 496, 504 (5th Cir. 2018).
III.
In its complaint, Sahara asserted one count of procedural due process and one count of ultra vires acts.4 To succeed on a constitutional due process claim, Sahara must demonstrate that the balance of the private interest, government interest, and value of additional procedure weighs in its favor. See Mathews v. Eldridge, 424 U.S. 319, 335 (1976). Its ultra vires claim is straightforward: Sahara argues that the government acted without statutory authority by recouping payments before it had provided an ALJ hearing. We reject each claim.5
The Fifth Amendment guarantees that no person shall “be deprived of . . . property . . . without due process of law[.]”
First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government‘s interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.
To successfully invoke the Due Process Clause, a plaintiff must demonstrate that it has a protected property or liberty interest at issue. See Bd. of Regents of State Colleges v. Roth, 408 U.S. 564, 569–71 (1972). Sahara maintains that it has a property interest in “Medicare payments it has earned for services rendered on properly billed claims.” This court has rejected a similar theory, where providers argued that they had “a property interest in legitimately earned, current [Medicaid] reimbursements that are not subject to investigation.” See Pers. Care Prods., Inc. v. Hawkins, 635 F.3d 155, 159 (5th Cir. 2011). But because we conclude that the government provided Sahara adequate process, we decline to decide the property interest question.6 Cf. Accident, Injury & Rehab., PC v. Azar, 943 F.3d 195, 204 (4th Cir. 2019) (rejecting identical due process claim while declining to determine whether provider had protected property interest).
Looking to the first and third Mathews factors, Sahara‘s private interest in adding a hearing outweighs the government‘s interest in efficient recoupment administration. But turning to the second Mathews factor, the sufficiency of the current procedures
1.
Sahara‘s private interest will be greatly affected by beginning recoupment. Counsel represents that “the government‘s recoupment will force Sahara out of business[.]” In the district court, the Administrator of Sahara declared that about 75% of the company‘s revenue comes from the Medicare program and that full recoupment would cause the company to close. What is more, Medicare recoupments are not subject to an automatic stay in bankruptcy. See Med-Cert, 2019 WL 426465, at *9. Wrongly recouped funds will be repaid with interest. See
The government interest, in comparison, is slight. Medicare possesses a broad systematic concern in recouping overpayments from providers. And the government has a valuable interest in conserving scarce administrative and financial resources. But as Sahara correctly notes, if at the end of the day, a provider is found to have been overpaid, the government gets its due sooner or later (with interest). The only questions here are when Sahara will pay and whether it will receive a hearing first. Accordingly, the private interest outweighs government interest.
Nonetheless, the adequate process that Sahara has received and the procedural protections it has chosen to forego weigh strongly, and decisively, against it. The constitutional minimum of due process guarantees that “notice and an opportunity to be heard be granted at a meaningful time and in a meaningful manner.” Gibson v. Tex. Dep‘t of Ins., 700 F.3d 227, 239 (5th Cir. 2012) (quoting Fuentes v. Shevin, 407 U.S. 67, 80, 92 (1972)) (internal quotation marks omitted). There is no dispute that Sahara received notice. The issue is whether it received a meaningful opportunity to be heard.
2.
“The type of hearing necessary—the process due—is a function of the context of the individual case.” Jones v. La Bd. of Sup‘rs of Univ. of La. Sys., 809 F.3d 231, 236 (5th Cir. 2015). Sahara has already received two meaningful opportunities to be heard. At step one, it could submit a written statement and additional evidence.
Sahara does not explain why steps one and two, standing alone, fail to satisfy the constitutional requirement. Instead, Sahara dwells on the procedural additions of the step-three ALJ hearing. According to Sahara, “an ALJ hearing provides essential procedural safeguards . . . in its Medicare appeal of the alleged overpayment.” It is true that a step-three hearing may offer “the opportunity to have a live hearing, present testimony, cross-examine witnesses, and submit written statements of law and fact.” Family Rehab., Inc. v. Azar, 886 F.3d 496, 499 (5th Cir. 2018) (citing
First, Sahara concedes that the hearing will not develop the factual record. Absent good cause, additional evidence can only be provided in steps one and two. See
Second, Sahara does not explain how the possibility of cross-examination at the hearing would benefit it. Cross-examination or a live hearing may be constitutionally required “where credibility [is] critical.” See Walsh v. Hodge, No. 19-10785, 2020 WL 5525397, at *6 (5th Cir. Sept. 15, 2020); see also Mathews, 424 U.S. at 343–44 (analyzing whether “issues of witness credibility and veracity . . . are critical to the decisionmaking process“); accord Doe v. Baum, 903 F.3d 575, 584 (6th Cir. 2018) (explaining, in context of Title IX disciplinary hearing, that “if credibility is in dispute and material to the outcome, due process requires cross-examination“); cf. Nondiscrimination on the Basis of Sex in Education Programs or Activities Receiving Federal Financial Assistance, 85 Fed. Reg. 30,026 (May 19, 2020) (to be codified at
Sahara does not submit that the credibility or veracity of the government‘s witnesses are at issue here. Cf. Jones, 809 F.3d at 237 (noting that “[i]t is difficult to see exactly where veracity or credibility would come into play” in a decision, based on applying organization policies to a paper record, which was “unrelated to the [plaintiff‘s] actions“). Indeed, Sahara does not identify a single point of inquiry it would pursue or a single dispute of material fact that it would address if given the opportunity to cross-examine the government‘s witnesses. Cf. Plummer v. Univ. of Houston, 860 F.3d 767, 783 (5th Cir. 2017) (Jones, J., dissenting) (“[A]dditional or substitute safeguards would have enhanced the quality of factfinding and adjudication by providing a confrontation right if material fact issues existed.“) (emphasis added). In short, Sahara does not explain what, in this case, cross-examination would add.
Third, even if Sahara received the hearing that it requests, it is unlikely that it would even receive the opportunity to cross-examine a witness. At the hearing, the ALJ “may not issue a subpoena to CMS or its contractors, on his or her own initiative or at the request of a party, to compel an appearance, testimony, or the production of evidence.”
Sahara contends that the step-three hearing “provides essential procedural safeguards,” but cannot explain what those safeguards are. The step-three hearing does not allow a provider to supplement the record and does not ensure that any government witnesses will be available. That means that “the very procedural safeguards that [Sahara] argues are critical are far from assured even at the ALJ hearing level.” Accident, Injury & Rehab., 943 F.3d at 204 (holding that the Medicare recoupment escalation procedure provided due process where the step-three ALJ hearing was functionally unavailable). In other words, Sahara‘s “argument relies on a faulty understanding of the relative benefits of an ALJ hearing and judicial review.” Id. And Sahara does not allege that the recoupment procedure itself is structured in an unconstitutional way.
Here, “the risk of erroneous deprivation and the likely value of any additional procedures” is “the factor most important to resolution of this case.” Gilbert v. Homar, 520 U.S. 924, 933 (1997). Sahara has failed to demonstrate why that factor weighs in its favor. Accordingly, it has failed to demonstrate why the overall Mathews balance favors it as well.
3.
Congress foresaw that an ALJ backlog may arise. It provided a solution: a provider may “escalate” an appeal directly from step two to step four (Appeals Board review) if no decision has been rendered 90 days after timely notice.
The Constitution entrusts the political branches, not the judiciary, with making difficult and value-laden policy decisions. There were an infinite number of schemes Congress could have reasonably selected. Congress settled on one that guarantees at least two levels of administrative review and judicial review. And in the case of a backlog, Congress provided the ability to bypass long waits on the way to judicial review. Sahara rejected that option. At bottom, Sahara believes a different scheme would be better. But we lack the power to change it. “[U]nless Congress exceeds its authority or trespasses on a protected area, judges are bound to respect its decisions—no matter what policy disagreements they may have with Congress‘s choices.” Diarmuid F. O‘Scannlain, The Role of the Federal Judge in the Constitutional Structure: An Originalist Perspective, 50 San Diego L. Rev. 517, 520 (2013). We have no opinion on the prudence of Congress‘s choice—and we do not need one. The Due Process Clause, not personal opinion, determines the outcome.
Our only sister circuit to face this question reached the same conclusion. The Fourth Circuit recently vacated an injunction that barred “HHS from pursuing recoupment efforts until [the plaintiff-provider] could challenge the recoupment amounts in a hearing before an ALJ.” See Accident, Injury & Rehab., 943 F.3d at 197. The court discussed two fatal flaws to
Sahara received some procedure, chose to forego additional protections, and cannot demonstrate the additional value of the hearing it requests. The procedure it received was constitutionally adequate, and we affirm the district court‘s dismissal of Sahara‘s due process claim. We likewise affirm the district court‘s denial of injunctive relief.
B.
Sahara devotes a single page to its ultra vires argument. It argues that injunctive relief is appropriate because “[t]he government has initiated recoupment of Sahara‘s current payments” even though it “failed to provide an administrative appeal in accordance with 42 U.S.C. § 1395ff.” This claim fails too.
The statute entitles a provider to two steps of administrative review before the government recoups funds. See
Sahara‘s out-of-circuit authority does not save it. It relies on a D.C. Circuit case that, in dicta, remarked that “nothing suggests that Congress intended escalation to serve as an adequate or exclusive remedy where, as here, a systemic failure causes virtually all appeals to be decided well after the statutory deadlines.” See Am. Hosp. Ass‘n, 812 F.3d at 191. But American Hospital was a very unusual case. Hospitals sought to mandamus the Secretary of HHS to comply with the 90-day hearing requirement and to solve the problem of the multi-year backlog. Id. at 185. The court held that mandamus jurisdiction existed, but that issuance of the writ was premature. It told Congress that “given the unique circumstances of this case, the clarity of the statutory duty likely will require issuance of the writ if the political branches have failed to make meaningful progress within a reasonable period of time—say, the close of the next full appropriations cycle.” Id. at 193.
Congress heeded that warning and appropriated $182.3 million to address the appeals backlog, “more than doubl[ing] [the agency‘s] FY 2017 disposition capacity.” Am. Hosp. Ass‘n v. Azar, No. 14-cv-851, 2018 WL 5723141, at *2 (D.D.C. Nov. 1, 2018). As a result, the agency is under a mandamus order to eliminate the backlog by the end of fiscal year 2022. See id. at *3. The “unique circumstances” that justified the American Hospital decision are no longer present. See Am. Hosp. Ass‘n, 812 F.3d at 193. The case is inapposite to Sahara‘s present claim.
* * *
An unwieldly backlog of cases has prevented Sahara Health Care from receiving a hearing from an administrative law judge. Congress predicted this might happen, and provided a statutory solution: the ability to escalate the appeal, culminating in judicial review. Sahara has chosen not to avail itself of that option. Given that choice, it cannot complain that it was denied due process or that the government acted ultra vires. We AFFIRM the judgment of the district court.