A March 27, 2018 decision by the United States Court of Appeals for the Fifth Circuit, Family Rehabilitation Incorporated v. Azar, II, No. 17-11337 (“Family Rehab”), potentially paves the way for Medicare providers to seek injunctions against the recoupment of alleged overpayments by Medicare Administrative Contractors (MACs) until an ALJ hears the case, if the recoupment would cause irreparable harm to the provider as the provider awaits an ALJ hearing during the backlog of pending Medicare appeals cases.
Typically, there is a four-level administrative appeals process for providers to challenge alleged Medicare overpayments before a claim is filed in Federal court. At the first level, the provider may file a claim for redetermination of the overpayment with the MAC. Second, the provider may request reconsideration from a Qualified Independent Contractor (QIC). If the QIC affirms the MAC’s determination, the MAC may begin recouping the overpayment by garnishing future reimbursements otherwise due the provider. Third, the provider may request a review before an ALJ. Fourth, the provider may appeal to the Medicare Appeals Council. If a provider disagrees with the Medicare Appeals Council’s decision, it may request judicial review in a Federal district court. Generally, a provider defending an alleged Medicare overpayment may have its case adjudicated in a Federal district court only after (i) satisfying all four stages of the administrative appeals process or (ii) after the provider has escalated its claim to the Medicare Appeals Council and the Medicare Appeals Council acts or fails to act within 180 days.
In Family Rehab, Family Rehabilitation, a Medicare provider of home health services (Provider) received a letter demanding it repay more than $7.8 million in excess Medicare reimbursements. After the Provider completed the second level appeals process, the alleged overpayment became subject to recoupment by its MAC. Because of the backlog of Medicare appeals pending before ALJs, the Provider alleged (and CMS did not refute) that it would be unable to obtain an ALJ hearing for “at least another three to five years.”The Provider asserted that if recoupment continued before it has an ALJ hearing, it would go out of business, causing a detrimental effect on its employees and patients. The Provider sought an injunction against the recoupment and irreparable harm that would follow, alleging that the situation (i) violated its rights to procedural due process and (ii) established an “ultra vires” cause of action, among other claims. The Provider did not seek a determination that the recoupments were wrongful or a substantive determination of the underlying alleged overpayment.
The court agreed that these alleged impacts of recoupment are sufficient to show irreparable injury and concluded the district court erred in dismissing Provider’s case for lack of subject matter jurisdiction. According to the Fifth Circuit, the Provider met the jurisdictional requirements under a “collateral-claim exception” to the general rule requiring exhaustion of the administrative appeals process because it sought only an injunction against recoupment of the alleged overpayment until an ALJ hears the case. The Fifth Circuit remanded the case back to the Federal district court for adjudication of the Provider’s procedural due process and “ultra vires” causes of action.
The Family Rehab court opinion is available here.
