United States District Court, E.D. North Carolina, Western Division
LOUISE W. FLANAGAN, District Judge.
This order memorializes and amplifies upon issues decided at hearing June 11, 2015. The court's framework for continued address of case issues also is discussed below.
As provided in the complaint, plaintiff, a home health agency located in Fayetteville, North Carolina, and current participant in the federal Medicare program, seeks a court order enjoining defendant from revoking its Medicare billing privileges. (Compl. ¶¶4, 13-14). Plaintiff contends that if this court denies its motion for injunctive relief, that denial will negatively affect the quality of healthcare available in an otherwise poor and rural community. (See id. ¶7).
On or about May 6, 2015, defendant, through the Centers for Medicare and Medicaid Services ("CMS"), issued a letter informing plaintiff that defendant was revoking plaintiff's Medicare billing privileges, effective June 5, 2015. (Id. ¶4). In its notice, defendant cited as the basis for its decision plaintiff's submission to Medicare of 56 claims "without a valid order from a physician, " suggesting Medicare fraud, spanning the period from January 1, 2011, until September 19, 2014. (Id.). Although defendant did not disclose the specific patient names or billing discrepancies with the notice, on May 14, 2015, defendant provided to plaintiff, through email, a list of the patient names at issue. (Id. ¶¶4-5). However, the May 14, 2015, email did not provide any explanation for defendant's claim the 56 patients had no "valid order from a physician. (Id.).
Plaintiff recently initiated an administrative appeal. (Id. ¶¶10, 36, 39). Within three days after receipt of defendant's notice, plaintiff contacted both Medicare's administrative contractor, Palmetto GBA, as well as CMS' general counsel, for the purpose of requesting a deferral. (Id.). However, each agency denied plaintiff relief. (Id. ¶10). On May 21, 2015, plaintiff filed with CMS' Office of Provider Enrollment Appeals a motion for reconsideration of defendant's decision. (Jacobs-Ghaffar Decl. DE 5-7, ¶13). In support of its motion, plaintiff advised that the billing discrepancy was the result of an error in its billing software, which had been remedied. (Id. ¶¶11-12, & Ex. B.L.). The Office of Provider Enrollment Appeals advised plaintiff that it would reconsider defendant's decision, and issue a decision on such reconsideration within 90 days. (Compl. ¶10).
On June 4, 2015, the court entered order granting plaintiff's motion for a temporary restraining order ("TRO"), and set hearing on plaintiff's motion for preliminary injunction for June 11, 2015. On June 9, 2015, defendant filed a cursory motion to dismiss, without any stated support in the law, for lack of subject matter jurisdiction, based on mootness, as well as a motion to continue the hearing. The court denied defendant's motion to continue by text order entered June 10, 2015.
A. Subject Matter Jurisdiction
In the court's order granting plaintiff's motion for a TRO, the court relied on the Administrative Procedure Act, 5 U.S.C. § 705, as its basis for jurisdiction. Reliance on the Administrative Procedure Act was in error, as noted at hearing. Nevertheless, the court finds the exercise of subject matter jurisdiction permissible on the basis set out below.
As applied to the Medicare Act via 42 U.S.C. § 1395ii, 42 U.S.C. 405(h) provides that "[n]o action... to recover on any claim' arising under the Medicare laws shall be brought under section 1331... of title 28.'" Shalala v. Ill. Council on Long Term Care, Inc., 529 U.S. 1, 5 (2000) (quoting 42 U.S.C. § 405(h)). Thus, as a general rule, neither Constitutional claims, Weinberger v. Salfi, 422 U.S. 749, 760-61 (1975), nor claims made under the Administrative Procedure Act, Heckler v. Ringer, 566 U.S. 602, 622-23 (1984), are cognizable without first being submitted to defendant. See Illinois Council, 529 U.S. at 15-20.
However, the jurisdictional exclusivity of the Medicare Act is subject to two exceptions. One such exception, applicable here, is the "entirely collateral" exception. In Mathews v. Eldridge, 424 U.S. 319 (1976), the Supreme Court held that where defendant renders a decision, Constitutional challenges arising from that decision need not be presented to defendant for reconsideration because defendant "ha[s] no power to amend the statute" prescribing the allegedly unconstitutional procedures, and such challenges are "entirely collateral" to plaintiff's claim on the merits. Id. at 329-31.
The Fourth Circuit interpreted the "entirely collateral" exception in Ram v. Heckler, 792 F.2d 444 (4th Cir. 1986), and that case, with which defendant's counsel was not familiar, controls here. The plaintiff, a doctor in Ram, filed an action alleging a deprivation of procedural due process after defendant notified him of an impending suspension of his Medicare billing privileges without benefit of a hearing, while an administrative appeal of defendant's decision was pending. See id. at 445. On those facts, the Fourth Circuit held the "entirely collateral" exception gave the district court jurisdiction over plaintiff's claim, finding that an administrative decision in plaintiff's favor would not remedy his Constitutional complaint, and that plaintiff had stated "at least a colorable" due process claim. Id. at 446.
In the case at bar, plaintiff's complaint alleges a procedural due process violation flowing from defendant's failure to hold a pre-deprivation hearing. Plaintiff filed this action after defendant provided notice of an impending suspension of its Medicare billing privileges. Although plaintiff has filed an administrative appeal, a favorable decision on reconsideration will not remedy any harm suffered by plaintiff accruing from defendant's initial decision. Finally, as defendant provided no pre-termination hearing, plaintiff has stated at least a colorable claim for deprivation of procedural due process. In sum, ...