MEMORANDUM OPINION AND ORDER RE APPLICATION FOR PRELIMINARY INJUNCTION
The Plaintiff in this matter, Tri County Home Health Services, Inc. (“Tri County”),
The Court conducted a hearing on Tri County’s application on February 12, 1999, pursuant to Fed. R. Bankr. P. 9014. After reviewing the testimony from the hearing and the record as a whole, the Court makes the following findings of facts and conclusions of law. Fed. R. Banks. P. 7052.
/. FINDINGS OF FACT
A. The Nature of Medicare Reimbursement: Statutory and Regulatory Authority
1. The Medicare Provider Agreement
The Medicare program, established under Title XVIII of the Social Security Act (commonly known as the Medicare Act, and codified at 42 U.S.C. § 1395
et seq.),
is a social insurance program which pays for covered medical items and services provided to eligible aged and disabled persons. HHS enters into contracts, known as provider agreements, with health care entities which will treat Medicare beneficiaries in return for Medicare reimbursement. 42 U.S.C. § 1395cc(e)(2);
Heckler v. Community Health Serv. of Crawford County, Inc.,
2. Medicare Reimbursement is Cost-Based
By statute, a provider is reimbursed for the actual “reasonable cost” of providing services to Medicare beneficiaries. “Reasonable cost” is determined in accordance with cost accounting regulations establishing the methods to be used and the times to be included. 42 U.S.C. § 1395x(v)(l)(A). Medicare reimbursement does not provide for the making of a profit. The principal reimbursement regulations appear at 42 C.F.R. § 413 et seq.
Reimbursement to providers for services rendered to Medicare beneficiaries is made by private organizations, such as Palmetto Government Benefits Administrators, Inc., (“Palmetto”). These organization act as fiscal intermediaries under contract with HHS. 42 U.S.C. § 1395h. The payment function requires ascertaining the “reasonable cost” of services rendered to beneficiaries. This payment process is a multi-faceted system. Interim payments are made to providers not less than monthly, with subsequent adjustments made for overpayments and underpayments, based on reviews of annual cost reports submitted by the provider and of additional information submitted throughout the year. 42 U.S.C. §§ 1395g(a), 1395x(v)(l)(A)(ii), 42 C.F.R. §§ 413.5(b)(1), (2), 413.64. “The intent is that the interim payments shall approximate actual costs [of providing Medicare services] as nearly as possible....” 42 C.F.R. § 413.64(b).
Interim payments are only estimates of what is actually due the provider. An intermediary may adjust the interim rate of payment if it has evidence that a provider’s actual costs fall significantly below the computed rate. 42 C.F.R. § 413.64(e). The primary source of such evidence is the cost report information which the provider must file at periodic intervals. 1
3. “Necessary Adjustments” for Over-payments
As designed by Congress, the Medicare reimbursement method is one of interim payments (based on estimates of a provider’s costs) subject to subsequent adjustments. As is apparent, a subsequent review can reveal that the interim payments have exceeded the provider’s actual costs, and hence, that the provider has been overpaid.
The Medicare statute at 42 U.S.C. § 1395g(a) expressly directs HHS to make “necessary adjustments on account of previously made overpayments.” Under this statutory mandate, the HHS “shall periodically determine” what a provider “should” be paid and accordingly make the “necessary adjustments” to reconcile this determination with what the provider was “previously” paid. 42 U.S.C. § 139og(a). Thus, it may accurately be stated that a provider’s proper “payment” is the amount disbursed by the Medicare program (in the form of interim payments) minus adjustments for any previous overpay-ments (or plus adjustments for previous underpayments).
4. Recent Legislative Changes in the Reimbursement of Home Health Providers
Concerned with the extraordinary growth in Medicare spending for home health services, Congress created a new statutory payment method for home health providers in the Balanced Budget Act of 1997 (“the BBA”), Public Law 105-33, at §§ 4604 et seq. (amending 42 U.S.C. § 1395x(v)(l)(L)). See also, 63 Fed.Reg. 15718 ff. (March 31, 1998). For fiscal years commencing October 1, 1997, or thereafter, a home health provider is reimbursed the lowest of (i) the provider’s actual reasonable allowable costs, (ii) a per-visit limitation in the aggregate, or (iii) a per-beneficiary limitation on the aggregate. Id. In brief, the effect of this law is to place a cap on what the home health provider can be paid. These new statutory criteria have resulted in significant changes to the payment of some home health providers. However, the BBA did not alter the basic premises set forth above: that the home health provider’s reimbursement is based on costs; that its payments will be based on estimates, subject to retrospective adjustments; and that Medicare overpayments can occur.
B. Statement of Facts
The relevant facts in this case are straightforward and undisputed. The Plaintiff operates a home health agency which participates in the Medicare program, pursuant to a provider agreement. The Plaintiff is reimbursed for services rendered to Medicare beneficiaries. The Plaintiff is reimbursed in the form of PIP payments. Palmetto is the Medicare fiscal intermediary which, under contract with HHS, administers the claims processing, reimbursement, auditing, and
On or about December 14, 1998, upon a review of the Plaintiffs payment rates in light of information submitted by the Plaintiff, Palmetto determined that the Plaintiff had been overpaid in the amount of $2,000,-417 for the fiscal year which ends (“FYE”) June 30, 1999. Palmetto notified the Plaintiff of this determination in writing. Also, the data submitted by the Plaintiff on its annual Medicare cost report for FYE June 30, 1998, showed a Medicare overpayment of some $221,824.00 in that fiscal year.
The Plaintiff filed its bankruptcy petition on January 14, 1999. Palmetto, as Medicare fiscal intermediary and as agent for HHS, has been withholding the Plaintiffs Medicare reimbursement since that date, as an adjustment for previously-made and determined Medicare overpayments made to the Plaintiff.
II. CONCLUSIONS OF LAW
It is the burden of the party seeking a preliminary injunction to show that it is entitled to one, not the burden of the other party to show that the movant is not entitled.
Granny Goose Foods, Inc. v. Bhd. of Teamsters,
An injunction is an extraordinary remedy.
Charter Township of Huron v. Richards,
The four elements to be considered when a movant seeks a preliminary injunction are (1) whether the movant has shown a strong or substantial likelihood or probability of success on the merits; (2) whether the movant has shown that an irreparable injury will occur absent an injunction; (3) whether the preliminary injunction would harm others; and (4) whether the public interest would be served by the issuance of a preliminary injunction.
Frisch’s Restaurant, Inc. v. Shoney’s, Inc.,
The Plaintiffs contention is that HHS’ withholding of the Plaintiffs Medicare reimbursement is improper; however, HHS contends that its withholding should be recognized as recoupment. The Court agrees with HHS and finds the withholding to be in the nature of an equitable recoupment.
Recoupment is “the setting off against asserted liabilities of a counterclaim arising out of the same transaction.”
Reiter v. Cooper,
There are two general requirements to characterizing a withholding as recoupment. First, some type of overpayment must have been made.
Kosadnar,
157 F.3d
HHS’ actions comport with a substantial body of legal authority which finds that Medicare withholding constitutes recoupment and is, therefore, exempt from the operation of the automatic stay in bankruptcy.
E.g., United States v. Consumer Health Serv. of Am., Inc.,
There are two appellate decisions which have addressed the issue of Medicare recoupment in bankruptcy. The more recent, and the one this Court hereby adopts as its own, is the D.C. Circuit’s 1997 decision of
United States v. Consumer Health Services of America, Inc.,
... In determining whether the pre-petition and post-petition services should be thought of as one transaction, the key ... is the Medicare statute. Since it requires [HHS] to take into account pre-petition overpayments in order to calculate [payment on] a post-petition claim ... Congress rather clearly indicated that it wanted a provider’s stream of services to be considered one transaction for purposes of any claim the government would have against the provider.
Id.
at 395;
see also, Malinowski,
In deciding
Consumer Health Services,
the D.C. Circuit refuted the reasoning of the Third Circuit case of
In re University Medical Center,
The Third Circuit, based upon an apparent misconception of the nature of Medicare reimbursement, believed that “Medicare over-payments made to [University Medical Center] in 1985 [did not] arise from the same transaction, for the purposes of equitable recoupment, as Medicare payments due [to University Medicare Center] for services provided in 1988.”
University Med. Ctr.,
In the instant case, at any rate, this court need not even decide between the D.C. Circuit’s and the Third Circuit’s ideas of what constitutes a “transaction.” On the facts of the instant case, the doctrine of recoupment directs that HHS must be allowed to withhold the Debtor’s reimbursement, even under the Third Circuit’s overly-restrictive conception. In December 1998, Palmetto determined that the Debtor has been overpaid $2,000,417 for the fiscal year ending June 30,1999. That is, of course, the current fiscal year. The current fiscal year will not end for another four-and-a-half months. Therefore, HHS’ current withholding is occurring within the same fiscal year as the overpayment which the current reimbursement is being withheld against. Hence, even under the Third Circuit’s faulty notion of what constitutes a “transaction” in Medicare reimbursement, HHS’ action necessarily constitutes recoupment against which the automatic stay does not apply.
Ultimately what bears particular note is that there really are two bases for the propriety of HHS’ withholding. These two bases are related, but they are legally separate and distinct. The one basis is the Medicare statute itself, without which there would be no such thing as Medicare reimbursement. The statute, at 42 U.S.C. § 1395g(a), contemplates and directs that adjustments will be made whenever it is determined that the interim payments previously disbursed were excessive. This is the fundamental payment provision which underlies Medicare reimbursement. There is no evading it or circumventing it under any authority or at any time. The other basis is the common law doctrine of equitable recoupment. Re-coupment is well-recognized as exempt from the operation of the automatic stay in bankruptcy. As the D.C. Circuit correctly concluded, either basis is sufficient to uphold HHS’ withholding as fully proper.
Consumer Health Serv.,
The Plaintiff states that it will suffer an irreparable injury if it does not obtain an injunction; however, the Plaintiff has failed to show the sort of injury which has been recognized as truly “irreparable.”
The Sixth Circuit has recognized that monetary damages do not generally constitute irreparable harm.
Manakee Prof'l. Med. Transfer Serv. v. Shalala,
Also in
Manakee,
the Sixth Circuit cited with approval the important decision of the Eleventh Circuit in
VNA of Greater Tift County, Inc. v. Heckler,
The Plaintiff appears to suggest that, absent injunctive relief, its home health patients will be left without necessary home health services. As a threshold consideration, only a Medicare home health patient has standing to raise this allegation.
Warth v. Seldin,
HHS does not operate Medicare, ultimately, in HHS’ own interest. Rather, this public agency is charged with protecting the interests of Medicare beneficiaries and with the effective management of the public funds entrusted to the Medicare program. HHS “has a critical interest in maintaining the integrity of the Medicare program for the benefit of all, including the taxpaying public.”
Neurological Associates-H Hooshmand v. Bowen,
If HHS were required to continue disbursing funds to the Plaintiff before first recovering the already-determined excess, it would merely set itself up for the prospect of further overpayments, compounding the current overpayment problem even further. An overpayment can conceivably be determined any time a provider’s costs (and other data) are reviewed. The Plaintiffs own recent history illustrates this. An overpayment was determined on each of two successive quarterly reviews in the previous fiscal year.
Furthermore, the Plaintiff is a PIP provider, whose interim payments are predicated on projections (by the provider) of the number of home health visits which the provider will be making to Medicare beneficiaries. Such projections are naturally subject to error or revision, again raising the prospect of an overpayment. The existence of currently-known overpayments means, in effect, that the provider has already been paid for services which it has not yet provided. To continue disbursing funds in that circumstance merely keeps the problem going and growing.
For these reasons, it is altogether possible that if HHS were required to continue mak
The public interest is critically at stake in the instant matter. The Sixth Circuit has made it clear in whose interest the Medicare program operates. That court has recognized on repeated occasions that Medieare-a social insurance program-was designed expressly for the benefit of elderly and disabled citizens. Medicare was not instituted by Congress with the express aim and purpose of benefitting health care providers. The considerable business benefit that providers may derive from participating in the Medicare program is purely incidental to the program’s actual aim and design as a health insurance system.
See, Baptist Hosp. E. v. Secretary of Health and Human Serv.,
The public interest would be grievously disserved if HHS were required to continue payments under the circumstances of this case before first recouping the overpay-ments previously made to the Plaintiff.
Psychiatric Care Day Hosp. Ctr. v. Shalala,
The Plaintiff has failed to carry its burden of showing that it is entitled to injunctive relief. The Plaintiff has not established any likelihood of prevailing on the merits, in light of the express statutory directive in the payment provision of the Medicare statute, 42 U.S.C. § 1395g(a), and in light of the doctrine of recoupment, either of which authorizes HHS’ withholding in this case. Moreover, relevant pronouncements from the Sixth Circuit and the Supreme Court indicate that the Plaintiff cannot establish irreparable injury. The issuance of an injunction would subvert the will of Congress and would pose harm to the Medicare Trust Fund and to its beneficiaries, present and future. Additionally, the issuance of an injunction would gravely disserve the public interest.
III. ORDER
It is therefore ORDERED that Plaintiffs Application for a Preliminary Injunction is DENIED.
IT IS SO ORDERED.
Notes
. A provider has a right to file an administrative appeal of an intermediary's reimbursement determination only upon the intermediary’s eventual issuance of a notice of program reimbursement, which occurs upon the final settlement of a provider’s annual cost report. 42 U.S.C. § 1395oo; 42 C.F.R. § 405.1803. Only after an exhaustion of administrative remedies may a court review a reimbursement determination of the Medicare program. 42 U.S.C. § 1395oo(f).
There is a firm jurisdictional bar against any court adjudicating any Medicare reimbursement dispute expect as provided in the Medicare stat
. This has implications not only for the future, but also for the Plaintiff's application for a turnover of reimbursement which has been withheld since the petition date. These funds are undeniably in dispute. The Plaintiff claims that HHS owes it those funds, while HHS maintains that the funds withheld were properly withheld under § 1395g(a) as a recoupment. "It is settled law that [a] debtor cannot use the turnover provisions [of the Bankruptcy Code] to liquidate non-tract disputes or otherwise demand assets whose title is in dispute.”
U.S. v. Inslaw, Inc.,
. Strongly worded comments from the Supreme Court indicate that the Court too plainly expects that the provider which does business with the Medicare program should know the law, its terms, and presumably, its various potential implications. In
Community Health Services of Crawford County,