MedEnvios Healthcare, Inc. v. United States Department of Health and Human Services
Filing
117
Order on Cross Motions for Summary Judgment. Granting in Part and Denying in Part 92 Motion for Summary Judgment; Granting in Part and Denying in Part 96 Motion for Summary Judgment. Closing Case. Signed by Senior Judge Robert N. Scola, Jr on 11/25/2024. See attached document for full details. (cds)
United States District Court
for the
Southern District of Florida
MedEnvios Healthcare, Inc.,
Plaintiff,
v.
Xavier Becerra, in his official
capacity as Secretary, United States
Department of Health and Human
Services, Defendant.
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Civil Action No. 23-20068-Civ-Scola
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Order on Cross Motions for Summary Judgment
This matter is before the Court on the parties’ second round of cross
motions for summary judgment. The Plaintiff MedEnvios Healthcare, Inc. filed
two motions for summary judgment (ECF Nos. 92, 96) and statements of
material facts (ECF Nos. 93, 97), to which the Defendant Secretary of Health
and Human Services responded (ECF Nos. 98, 99, 102, 103). MedEnvios filed
replies (ECF Nos. 104, 105). The Defendant filed its own motion for summary
judgment (ECF No. 95) and a statement of material facts (ECF No. 95), to which
MedEnvios responded (ECF Nos. 100, 101). The Defendant filed a reply (ECF
No. 106). The Court also held a hearing on the cross-motions for summary
judgment on November 21, 2024, and has considered the briefing, the record,
and the relevant legal authorities. For the following reasons, the Court grants
in part and denies in part MedEnvios’s motions for summary judgment (ECF
Nos. 92, 96) and grants in part and denies in part MedEnvios’s motion for
summary judgment (ECF No. 95). Specifically, the Court finds that
MedEnvios’s due process rights were not violated (1) when the Health Integrity
Audit’s target universe did not include zero-paid claims; (2) by the
accumulation of interest on the alleged overpayment amounts; and (3) by the
fact of recoupment of the alleged overpayments. However, MedEnvios is entitled
to an accounting as agreed to by the parties at the November 21, 2024 hearing.
1. Background
The federal Medicare program is administered by the Department of
Health and Human Services (“HHS” or “the Department”) through the Centers
for Medicare & Medicaid Services (“CMS”). The Department through CMS and
its contractors relies on post-payment audits to identify problems with
Medicare claims made by healthcare providers and suppliers because pre-
payment review of the over 1 billion claims received annually would be
untenable. See Fla. Med. Ctr. of Clearwater, Inc. v. Sebelius, 614 F.3d 1276,
1279 n.4 (11th Cir. 2010) (“For reasons of administrative efficiency, carriers
typically authorize payment on claims immediately upon receipt of claims, so
long as the claims do not contain glaring irregularities.”) “CMS contractors may
conduct a post-payment audit of providers to ensure that the Medicare services
that providers are billing are medically necessary and meet the requirements of
the Medicare program.” Gen. Med., P.C. v. Azar, 963 F.3d 516, 519 (6th Cir.
2020) (citing 42 U.S.C. § 1395ddd(b)). “In a post-payment audit CMS
contractors review a random sample of a provider's Medicare claims. CMS
contractors will review the records and then calculate an error rate based on
the review. If there is a sustained or high level of payment error, the CMS
contractor will extrapolate that error rate over the provider’s total Medicare
claims to determine a total amount of overpayment.” Id. (cleaned up) (citing 42
U.S.C. § 1395ddd(f)(3)-(4)).
The Plaintiff, MedEnvios, is a Florida supplier of durable medical
equipment, prosthetics, orthotics, and supplies enrolled in the Medicare
program. This is a dispute over two post-audit determinations by HHS (the
“Health Integrity Audit” and the “Safeguard Audit”) that the Department
overpaid MedEnvios for Medicare-covered medical equipment. The two
determinations resulted in three levels of administrative appeals and
culminated with final agency decisions by administrative law judges (“ALJs”).
MedEnvios appealed each final agency decision to the district court, and this
Court consolidated the two cases on MedEnvios’s unopposed motion to do so,
noting the two common legal issues between them. (ECF No. 29.) In both
appeals processes, MedEnvios has received partially favorable decisions
resulting in a reduction of the total demanded overpayment amount. However,
the reviewer at each level has upheld the general design of the audits and their
sampling in both appealed matters.
The parties previously cross-moved for partial summary judgment. On
March 25, 2024, the Court granted in part and denied in part both parties’
motions. (Order on Parties’ Cross-Motions for Summary Judgment, ECF No.
84.) Specifically, the Court found that MedEnvios’s procedural due process
rights were not violated when the Defendant excluded “zero-paid” claims from
the sampling universe in the two post-payment audits, but were violated when
the Defendant failed to provide evidence supporting the recalculated
overpayments. (Id. at 7-8.) The Court thus vacated the extrapolated
overpayment demands at issue. (Id. at 1.) The Court subsequently denied the
Defendant’s motion for reconsideration of the Court’s latter conclusion. (ECF
No. 91.)
Now, the parties have cross-moved for summary judgment on all
remaining claims and issues. These issues, on which MedEnvios seeks
declaratory judgments are whether (1) the Defendant failed to produce the
target universe of claims with respect to the Health Integrity Audit as to violate
MedEnvios’s procedural due process rights; (2) the Defendant’s delays in
adjudicating MedEnvios’s appeals of both audits led to an excessive
accumulation of interest as to violate MedEnvios’s procedural due process
rights; (3) the Defendant improperly recouped funds with respect to both audits
as to violate MedEnvios’s procedural due process rights; and (4) whether the
Defendant failed to give MedEnvios a proper accounting of both audits as to
violate MedEnvios’s procedural due process rights.
2. Legal Standard
Summary judgment is proper if, following discovery, the pleadings,
depositions, answers to interrogatories, affidavits, and admissions on file show
that there is no genuine issue as to any material fact and that the moving party
is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986); Fed. R. Civ. P. 56. “An issue of fact is ‘material’ if, under the
applicable substantive law, it might affect the outcome of the case.” Hickson
Corp. v. N. Crossarm Co., 357 F.3d 1256, 1259-60 (11th Cir. 2004). “An issue of
fact is ‘genuine’ if the record taken as a whole could lead a rational trier of fact
to find for the nonmoving party.” Id. at 1260. All the evidence and factual
inferences reasonably drawn from the evidence must be viewed in the light
most favorable to the nonmoving party. See Adickes v. S.H. Kress & Co., 398
U.S. 144, 157 (1970); Jackson v. BellSouth Telecomms., 372 F.3d 1250, 1280
(11th Cir. 2004).
Once a party properly makes a summary judgment motion by
demonstrating the absence of a genuine issue of material fact, the nonmoving
party must go beyond the pleadings and designate specific facts showing that
there is a genuine issue for trial. See Celotex, 477 U.S. at 323-24. The
nonmovant’s evidence must be significantly probative to support the claims.
See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). The Court will
not weigh the evidence or make findings of fact. See id.; Morrison v. Amway
Corp., 323 F.3d 920, 924 (11th Cir. 2003). Rather, the Court’s role is limited to
deciding whether there is sufficient evidence upon which a reasonable juror
could find for the nonmoving party. Id. “If more than one inference could be
construed from the facts by a reasonable fact finder, and that inference
introduces a genuine issue of material fact, then the district court should not
grant summary judgment.” Bannum, Inc. v. City of Fort Lauderdale, 901 F.2d
989, 996 (11th Cir. 1990).
3. Analysis
As the Court explains in further detail below, MedEnvios’s due process
rights were not violated (1) when the Health Integrity Audit did not include
zero-paid claims in its target universe; (2) by the accumulation of interest on
the alleged overpayment amounts; and (3) by the recoupment of the alleged
overpayments. MedEnvios, however, is entitled to an accounting as agreed to
by the parties at the November, 21, 2024 hearing.
A. The Court’s Jurisdiction
A threshold issue is the Court’s jurisdiction to review final decisions of
the Secretary of the HHS. Although the Defendant spent some time in its
briefing discussing “[t]he scope of judicial review” of this Court (see, e.g., ECF
No. 94, at 2-3), the Defendant does not seriously dispute that the Court has
the jurisdiction to decide de novo the constitutional adequacy of the HHS’s
procedural due process protections as applied in this case. The Defendant also
did not raise this issue at the November 21, 2024 hearing.
When exercising its jurisdiction on the parties’ last round of crossmotions for summary judgment, the Court explained that 42 U.S.C. § 405(g)
gives it jurisdiction to review final decisions of the Secretary of HHS. 42 U.S.C.
§ 405(h); Heckler v. Ringer, 466 U.S. 602, 614-15 (1984) (“42 U.S.C. § 405(h),
made applicable to the Medicare Act[,] . . . provides that § 405(g), to the
exclusion of 28 U.S.C. § 1331, is the sole avenue for judicial review for all
‘claim[s] arising under’ the Medicare Act.”). Judicial review of an ALJ decision
under § 405(g) is “limited to an inquiry into whether there is substantial
evidence to support the findings of the [ALJ], and whether the correct legal
standards were applied.” Wilson v. Barnhart, 284 F.3d, 1219, 1221 (11th Cir.
2002). “Substantial evidence is more than a scintilla and is such relevant
evidence as a reasonable person would accept as adequate to support a
conclusion.” Crawford v. Comm’r of Soc. Sec., 363 F.3d 1155, 1158 (11th Cir.
2004) (quoting Lewis v. Callahan, 125 F.3d 1436, 1439 (11th Cir. 1997)).
Whether the ALJ applied the correct legal standards is a question of law, which
this Court reviews de novo. Graham v. Bowen, 790 F.2d 1572, 1575 (11th Cir.
1986). “[A] court reviewing an agency determination under § 405(g) has
adequate authority to resolve any statutory or constitutional contention that
the agency does not, or cannot, decide, including, where necessary, the
authority to develop an evidentiary record.” Shalala v. Illinois Council on Long
Term Care, Inc., 529 U.S. 1, 23-24 (2000).
All the remaining claims allege violations of MedEnvios’s rights to
procedural due process. This Court previously held that MedEnvios has “a
property interest in the funds subject to the extrapolated overpayment
demands” and its “property interests are therefore at stake in this appeal of the
[Defendant’s] overpayment demands.” (Order on Cross-Motions for Summary
Judgment, at 4.)
“The fundamental requirement of due process is the opportunity to be
heard ‘at a meaningful time and in a meaningful manner.’” Mathews v.
Eldridge, 424 U.S. 319, 333 (1976) (quoting Armstrong v. Manzo, 380 U.S. 545,
552 (1965)). “[I]ndividuals whose property interests are at stake due to
government actions are entitled to notice of the proceedings and an opportunity
to be heard.” Mesa Valderrama v. United States, 417 F.3d 1189, 1196 (11th Cir.
2005) (citing Dusenbery v. United States, 534 U.S. 161, 167–68 (2002)). “‘Due
process, unlike some legal rules, is not a technical conception with a fixed
content unrelated to time, place and circumstances.” Cafeteria Workers v.
McElroy, 367 U.S. 886, 895 (1961). The concept “is flexible and calls for such
procedural protections as the particular situation demands.” Morrissey v.
Brewer, 408 U.S. 471, 481 (1972).
When evaluating an alleged due process violation, courts consider “three
distinct factors: 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.” Mathews, 424 U.S. at 335.
B. Failure to Produce the Target Universe of Claims in the Statistical
Sampling with Respect to the Health Integrity Audit
Only with respect to the Health Integrity Audit, MedEnvios claims its
procedural due process rights were violated when the Defendant “fail[ed] to
produce the target universe of claims in the contractor’s statistical sampling
and extrapolation” that resulted in the initial overpayment demand. (ECF No.
96 at 12.) MedEnvios specifically cites the fact that the Defendant did not
produce a universe that included zero-paid claims. (Id. at 13-14.)
The Defendant casts MedEnvios’s claim as another way of arguing that
the postpayment audit was based on a sample that should have, but did not,
include “zero-paid claims.” (ECF No. 102 at 3-5; ECF No. 94 at 7.) The
Defendant points to Magistrate Judge Goodman’s denial of MedEnvios’s motion
regarding the alleged incompleteness of the Administrative Record, and that
this Court also ruled on the first round of summary judgment motions “that a
Medicare program integrity contractor’s postpayment audit is not required to
include zero-paid claims in its universe of claims.” (ECF No. 102 at 4-5 (citation
omitted); ECF No. 94 at 7.)
In its own motion for summary judgment, the Defendant argues that the
ALJs found that the audits followed the applicable guidelines, and that
MedEnvios indicated that it “had received the applicable audit documentation.”
(ECF No. 94, at 6.) The Defendant also points to the fact that “[t]he statisticians
who participated in the redetermination and the reconsideration levels of the
appeal process indeed upheld the statistical work done by the program
integrity contractors.” (Id.)
The Defendant also argues that “MedEnvios had everything that Health
Integrity, the program integrity contractor, had created and documented;
MedEnvios had everything that was before the agency adjudicators, including
the ALJ, the final agency decision-maker.” (ECF No. 106, at 3.) To the
Defendant, MedEnvios is simply mistaken as to what the universe is: it is not
all claims submitted for review, but only paid claims submitted for review. (Id.
at 4 (citing MPIM, Chapter 8, § 8.4.3.2.1 B).)
MedEnvios has several responses. First, it disputes that it ever received
the proper audit documentation. (ECF No. 100 at 11.) Second, MedEnvios does
not believe that its ability to replicate the sample suffices for due process
because the MPIM “require[s] that the sampling frame must be able to be
recreated,” rather than just replicated. (Id. at 12) Here, “there is no indication
that the statisticians were able to recreate the sampling frame and sampling
process.” (Id. at 13-14.)
Third, MedEnvios notes that Judge Goodman, in his order, noted that
“[t]he analysis of whether MedEnvios was seeking to complete or supplement
the administrative record, and whether the recalculation worksheets were
considered by the ALJs below, is distinct from whether their absence from the
record deprived MedEnvios of its due process rights.” (Id. at 15 (citing ECF No.
91, 3-4).)
In sum, MedEnvios’s claim comes down to whether it received the target
“universe” of claims subject to the Health Integrity Audit. To resolve
MedEnvios’s claim, then, the Court must determine what that “universe” is,
and whether that universe comports with constitutional due process.
For Part B claims, which are what are at issue in the Health Integrity
Audit, MPIM guidance is clear that the universe consists of those “fully and
partially paid claims submitted by the provider by the provider/supplier for the
period selected for review and for the sampling units to be reviewed.” MPIM
§ 8.4.3.2.1.B. This is in contrast with Part A claims, in which “[c]laims with no
payment may be included in the universe . . . .” MPIM § 8.4.3.2.1.A. Because
MedEnvios received the target universe as defined by MPIM guidance (fully and
partially paid claims), the Defendant provided MedEnvios with the target
universe of claims. And as this Court has previously explained, excluding
“zero-paid” claims from the universe does not violate MedEnvios’s procedural
due process rights. (Order on Cross-Motions for Summary Judgment, 6-7.)
MedEnvios may disapprove of how the target universe is defined, but the
Court will repeat what it said in its order on the parties’ first round of crossmotions for summary judgment: “Due process does not require perfect process
nor does it entail a right to choose the precise process [one might] desire. In
this particular case, the process was potentially imperfect but reasonably
tailored to the aims of the audit.” (Id. at 6 (cleaned up).)
Therefore, with respect to this claim, the Defendant’s motion for
summary judgment is granted and MedEnvios’s is denied.
C. Excessive Accumulation of Interest Claim
With respect to both audits, MedEnvios argues that its procedural due
process rights were violated when the Defendant did not provide MedEnvios
with an ALJ hearing for over four years after MedEnvios requested one, which
“led to an accumulation of undue interest [on the overpayments] all while
MedEnvios was deprived of documentation necessary to mount a due process
challenge.” (ECF No. 92 at 10; see also ECF No. 96 at 16.) MedEnvios points
out that the Defendant was statutorily required under 42 C.F.R. § 405.1016 to
provide MedEnvios a hearing within ninety days of such a request. (ECF No. 92
at 9.)
The Defendant cites two cases that held that no violation of due process
rights occurs based on the accumulation of interest when the appellant does
not exercise its statutory option to escalate its appeal once the ninety-day
timeline has expired. (ECF No. 94 at 8-9 (citing Sahara Home Care, Inc. v. Azar,
975 F.3d 523 (5th Cir. 2020); Accident, Inj. & Rehab., PC v. Azar, 943 F.3d 195
(4th Cir. 2019)).)
It is undisputed that MedEnvios did not exercise its statutory right under
42 U.S.C. § 1395ff(d)(3)(A) to escalate its appeal to the Medicare Appeals
Council after ninety days, and then to the district court if the Appeals Council
did not rule within 180 days. 42 U.S.C. § 1395ff(d)(2)(A); 42 C.F.R. §
405.1100(c). MedEnvios counters that the Defendant “fails to recognize that if
[it] had escalated its appeals past the ALJ, it would have been deprived of its
opportunity be heard in a meaningful manner” due to the Defendant’s other
procedural due process violations. (ECF No. 100 at 16 (quoting Mathews, 424
U.S. at 333).)
However, “the escalation procedure is specifically made part of the
process to ensure a timely post-deprivation review in a court of law.” Accident,
Inj. & Rehab., PC, 943 F.3d at 204; Padda v. Becerra, 37 F. 4th 1376, 1383 (“[A]
provider's ability to escalate its claims ensures that the provider receives a
timely disposition of its claims, even when there are delays at the ALJ stage.”);
see also Sahara, 975 F.3d at 532 (“And in the case of a backlog, Congress
provided the ability to bypass long waits on the way to judicial review.”)
Judicial review “is the classic protection provided by the Due Process Clause
against arbitrary deprivations of life, liberty, or property.” Padda, 37 F. 4th at
1383. Therefore, under the escalation procedures authorized by statute,
MedEnvios could have more expeditiously brought the same claims it brought
to this Court. That it did not was its choice and it “cannot complain that its
election denies it due process.” Accident, Inj. & Rehab., PC, 943 F.3d at 204;
see also Padda, 37 F.4th at 1384; Sahara, 975 F.3d at 532. 1 Moreover, as
MedEnvios conceded at the hearing, it is entitled to interest on the funds that
were improperly recouped in the first place. See 42 U.S.C. § 1395ddd(f)(2)(B),
Here, MedEnvios has adequate protections for its own property.
Therefore, with respect to this claim, the Defendant’s motion for
summary judgment is granted and MedEnvios’s is denied.
D. Improper Recoupment of Funds
MedEnvios next argues that the withholding of the statistical sampling
documentation held to be a due process violation in the Court’s order on the
parties’ first round of cross-motions for summary judgment “generated a
corresponding due process violation.” (ECF No. 92 at 10-11, ECF No. 96 at 17.)
Specifically, MedEnvios argues that this corresponding violation consists of
“Defendant’s recoupment of MedEnvios’ Medicare reimbursements and
collection in excess of the alleged overpayment, with interest, while MedEnvios
remained unable to mount a meaningful challenge to the recalculated
extrapolation given Defendant’s withholdings.” (ECF No. 92 at 11.) MedEnvios
again cites Padda and Sahara, where the Fourth and Fifth Circuits,
respectively, held that recoupment prior to an ALJ hearing did not violate a
1 Because the Court finds for the Defendant on this basis, it does not address the
Defendant’s alternative argument that the Court has no basis to alter the interest to
be charged on overpayments. (ECF No. 94 at 7-8.)
provider’s right to due process where the first two stages of administrative
review “gave the providers notice and an opportunity to be heard and because
the providers had chosen to forgo escalation past the ALJ.” (ECF No. 92 at 1112.) MedEnvios believes these cases are distinguishable because where in those
cases the providers had a meaningful opportunity to be heard at the first two
levels of administrative review, MedEnvios was “not afforded the documentation
necessary to mount a meaningful challenge to the recalculations.” (Id. at 12.) In
other words, it contends that it “never got[] the same notice and opportunity to
be heard that the providers had in Padda and Sahara.” (Id.)
The Defendant, on the other hand, contends that “MedEnvios’s
complaint about recoupment is apparently based on dissatisfaction that the
overpayments were determined at all.” (ECF No. 94 at 10.) The Defendant also
points out that Padda and Sahara did not “involve[] facts where a court found
that recoupment should not have occurred” and thus do not “suggest[]
guidelines for evaluating recoupment as erroneous.” (ECF No. 98 at 5.)
The Court agrees with the Defendant. Padda and Sahara do not involve
instances in which recoupments were deemed erroneous. Moreover, HHS has a
statutory right to recover alleged overpayments only after redetermination and
reconsideration. See 42 U.S.C. § 1395ddd(f)(2)(A). And MedEnvios is adequately
protected should the overpayments be deemed improper because it is entitled
to receive back those funds, with interest. See 42 U.S.C. § 1395ddd(f)(2)(B).
Weighing the different interests at stake and the protections provided to
MedEnvios, the Court concludes that the Defendant’s original due process
violation does not make the statutorily prescribed conduct of recoupment itself
a corresponding due process violation.
Therefore, with respect to this claim, the Defendant’s motion for
summary judgment is granted and MedEnvios’s is denied.
E. Improper Accounting
At the hearing, the parties agreed that MedEnvios is entitled to an
accounting on the debts and credits associated with the alleged overpayments.
MedEnvios is entitled to an accounting that reflects those debts and credits,
such as the “‘L’ Ledger” received by First Coast Services discussed at the
hearing.
With respect to this claim, MedEnvios’s motion for summary judgment is
granted and the Defendant’s is denied.
4. Conclusion
For the foregoing reasons, the Court grants in part and denies in part
MedEnvios’s motions for summary judgment (ECF Nos. 92, 96) and grants in
part and denies in part MedEnvios’s motion for summary judgment (ECF No.
95). To summarize, MedEnvios’s due process rights were not violated (1) when
the Health Integrity Audit did not include zero-paid claims in its target
universe; (2) by the accumulation of interest; and (3) by the fact of recoupment.
MedEnvios is entitled to an accounting as agreed to by the parties at the
November, 21, 2024 hearing.
The clerk is directed to close this case.
Done and ordered at Miami, Florida on November 25, 2024.
___________________________________
Robert N. Scola, Jr.
United States District Judge
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