Feldman et al v. The Department of Health and Human Services et al

Filing 15

RULING the Motion to Dismiss is GRANTED (doc. 7), and this matter is hereby DISMISSED for lack of subject matter jurisdiction. Plaintiffs Motion for a Temporary Restraining Order (doc. 8) is hereby DENIED as moot. Signed by Chief Judge Brian A. Jackson on 8/10/2012. (PJH)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

ARNOLD FELDMAN, M.D. and
SOUTHWEST MISSISSIPPI
ANESTHESIA, P.A., INC. D/B/A
THE FELDMAN INSTITUTE
CIVIL ACTION
VERSUS
NO. 12-246-BAJ-SCR
THE DEPARTMENT OF
HEALTH AND HUMAN SERVICES
and CENTERS FOR MEDICARE &
MEDICAID SERVICES, KATHLEEN
SEBELIUS in her official capacity as
Secretary of D.H.H.S., MARILYN
TAVENNER, in her official capacity
as Administrator of CMS, and
PINNACLE BUSINESS SOLUTIONS,
INC.

RULING
These matters are before the Court on a Motion for a Temporary
Restraining Order (“TRO”) filed by plaintiffs, Arnold Feldman and the Feldman
Institute (“Plaintiffs”) (doc. 8), and a Motion to Dismiss for lack of subject matter
jurisdiction pursuant to Fed. R. Civ. Proc. Rule 12(b)(2) (doc. 7), filed by the
defendants in the above-captioned matter (“Defendants”). Both motions were
filed on August 1, 2012. Pursuant to Fed. R. Civ. Proc. Rule 65, Plaintiffs seek to
prevent Defendants from recouping allegedly improperly paid sums of money
that were paid to Plaintiffs by the Centers for Medicare and Medicaid Services
(“CMS”) at the time of the initial processing of the claims. Defendants have

opposed Plaintiffs’ motion (doc. 9), and Plaintiffs have opposed Defendants’
motion (doc. 14). A hearing was held on the issue of subject-matter jurisdiction
on August 8, 2012.

BACKGROUND
Plaintiffs submit that they operate a pain management clinic in Baton
Rouge, Louisiana, which provides medical services to approximately 2000
patients, many of whom qualify for benefits under the Medicare statute. The
clinic employs approximately 40 employees (doc. 8-1, p. 2). Plaintiffs assert that
one of the defendants, Pinnacle Business Solutions, Inc. (“Pinnacle”), is a private
organization that processes Plaintiffs’ reimbursement claims for services
rendered to eligible Medicare beneficiaries.

Pinnacle acts as a fiscal

intermediary between CMS and Plaintiffs (doc. 8-1, p. 2). Plaintiffs further assert
that AdvanceMed1 is a contractor that was awarded a contract with CMS to
reopen or revise any initial determination regarding payment for medical services
rendered, and to then make binding recommendations to Pinnacle or CMS
regarding payment of Medicare claims (doc. 8-1, p. 3).
Plaintiffs contend that in October of 2009, AdvanceMed began conducting
a post-payment review of paid Medicare claims that were previously reimbursed
by Pinnacle (doc. 8-1, p. 3). Plaintiffs further contend that in December of 2010,
AdvanceMed notified Plaintiffs that Dr. Feldman was overpaid by $1,039,528.00,
and retroactively denied coverage for 99.1 percent of all claims reviewed (doc. 81

AdvanceMed is not a defendant in this case.
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1, p. 3). As a result, Plaintiffs assert that Pinnacle issued a demand letter for the
allegedly delinquent sum that advised Plaintiffs that if the payment was not made
in full by January 19, 2011, Pinnacle would withhold all reimbursement payments
owed Plaintiffs until payment in full was received (doc. 8-1, p. 4).
To avoid making the payment in full, Plaintiffs allege that they entered into
a repayment plan, under which they would make a monthly payment of
$14,350.00 over a period of 60 months (doc. 8-1, p. 5). Plaintiffs further allege
that Pinnacle accepted 3 payments in the above amount before advising
Plaintiffs—in a letter dated January 12, 2012—that the time frame of the
repayment plan would be reduced to 36 months, which would increase Plaintiffs’
monthly payments to $18,389.63 per month. The letter also asserted that a
default would result in Plaintiffs’ account being set at a 100 percent withholding
(doc. 8-1, p. 5).
Plaintiffs aver that as of January 18, 2011, they began the administrative
appeal process by filing a Request for Redetermination with Pinnacle. They
subsequently received an unfavorable decision (doc. 8-1, p. 4). On May 26,
2011, Plaintiffs filed a Request for Reconsideration with the Qualified
Independent Contractor, to continue their appeals process (doc. 8-1, p. 4).
Plaintiffs allege that they received a partially favorable decision from the Qualified
Independent Contractor, who found that Plaintiffs owed a balance of $543,093.00
(as opposed to the original balance of $1,039,528.00) (doc. 8-1, p. 4).

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However, Plaintiffs submit that they still disputed the amount owed, and
submitted an appeal to the Office of Medicare Hearings and Appeals, requesting
an Administrative Law Judge Hearing of the remaining claims (doc. 8-1, p. 4).
Plaintiffs further submit that the hearing would be the first time they would receive
an evidentiary hearing and the opportunity to argue their claims before a neutral
third party (doc. 8-1, p. 4). Plaintiffs assert that their claims have now been
pending before the Administrative Law Judge for more than ten months,2 and that
they cannot afford to continue to make the monthly payments (in either of the
amounts) (doc. 8-1, pp. 4-5). Plaintiffs further assert that a default is imminent,
and they do not have the means to survive a 100 percent recoupment, thus they
will suffer irreparable harm unless injunctive relief is granted (doc. 8-1, pp. 5-6).
Defendants move to dismiss this action based on lack of subject matter
jurisdiction, asserting that Plaintiffs’ have failed to exhaust administrative
remedies available to them (doc. 7, p. 1). Defendants argue that, by seeking to
enjoin the Secretary from collecting the alleged overpayment, Plaintiffs are
attempting to bypass the statutory and administrative review scheme that
Congress intended to apply to this type of dispute (doc. 7-1, p. 2). Defendants
contend that both the Supreme Court of the United States and the United States
2

Plaintiffs argue that, pursuant to 42 C.F.R. § 405.1016, an Administrative Law Judge is
required to issue a decision no later than the end of the 90-day calendar period beginning on
the date the request for hearing is received. However, the Court notes that it will not address an
issue that is currently pending before another judge.
Nonetheless, the Court notes that, pursuant to 42 C.F.R. § 405.1104(a), Plaintiffs may
request a review by the Medicare Appeals Council when an Administrative Law Judge does not
issue a decision timely. Plaintiffs have not set forth any evidence which would suggest they
have attempted to request a review.
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Court of Appeals for the Fifth Circuit have established that exhaustion of
administrative remedies is a strict jurisdictional prerequisite to filing suit under the
Medicare Act, and that where a provider seeks immediate injunctive relief without
prior exhaustion, the suit must be dismissed (doc. 701, p. 2).

LAW AND ANALYSIS
“Injunctive relief is an extraordinary and drastic remedy, and should only
be granted when the movant has clearly carried the burden of persuasion.”
Anderson v. Jackson, 556 F.3d 351, 360 (5th Cir. 2009) (quoting, Holland Am.
Ins. Co. v. Succession of Roy, 777 F.2d 992, 997 (5th Cir. 1974). “The party
seeking such relief must satisfy a cumulative burden of proving each of the four
elements enumerated before a temporary restraining order or preliminary
injunction can be granted.” Clark v. Prichard, 812 F.2d 991, 993 (5th Cir. 1987).
“Specifically, the movant must show: (1) a substantial likelihood that plaintiff will
prevail on the merits, (2) a substantial threat that plaintiff will suffer irreparable
injury if the injunction is not granted, (3) that the threatened injury to plaintiff
outweighs the threatened harm the injunction may do to defendant, and (4) that
granting the preliminary injunction will not disserve the public interest.” Holland
Am. Ins. Co., 777 F.2d at 997 (quoting, Canal Auth. v. Callaway, 489 F.2d 567,
572 (5th Cir. 1974)).
However, jurisdiction “is a threshold issue that must be resolved before
any federal court reaches the merits of the case before it.” Perez v. U.S., 312
F.3d 191, 194 (5th Cir. 2002).

A federal district court is a court of limited
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jurisdiction and can only exercise that jurisdiction which is statutorily conferred
upon it by Congress. Margin v. Sea-Land Services, Inc., 812 F.2d 973, 976 (5th
Cir. 1987). Congress imposed particular limitations on the jurisdiction of federal
courts to review disputes arising under the Social Security Act.
The Medicare Act, 42 U.S.C. § 1395 (“The Act”), establishes a federally
subsidized health insurance program that is administered by the Secretary. The
jurisdiction of a federal court to review a claim arising under the Medicare Act is
conferred by 42 U.S.C. § 402(g) which, as made applicable to the Medicare Act
by 42 U.S.C. § 1395ff, provides: “[a]ny individual, after a final decision of the
[Secretary] made after a hearing to which he was a party, irrespective of the
amount in controversy, may obtain a review of such decision by a civil action
commenced within sixty days after the mailing to him of notice of such decision
or within such further time as the [Secretary] may allow.” 42 U.S.C. § 405(g); see
also 42 U.S.C. § 1395ff.
42 U.S.C. § 405(g) is the sole means of obtaining judicial review of a claim
arising under The Act and 42 U.S.C. § 405(h), as incorporated by 42 U.S.C. §
1395ii, bars judicial review in any manner other than that set forth in Section
405(g). Accordingly, one must exhaust the administrative remedy provided by the
Secretary before judicial review can be sought and 28 U.S.C. § 1331 federal
question jurisdiction can be invoked. See Shalala v. Il. Council on Long Term
Care, Inc., 529 U.S. 1, 120 S.Ct. 1084 (2000); Heckler v. Ringer, 466 U.S. 602,

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104 S.Ct. 2013 (1984); Affiliated Prof’l Home Health Care Agency v. Shalala, 164
F.3d 282 (5th Cir. 1999).
The Act and implementing regulations provide four levels of administrative
review: a redetermination; a request for reconsideration; a hearing before an
Administrative Law Judge; and a review by the Medicare Appeals Council
(“MAC”).

42 U.S.C. § 1395ff; 42 C.F.R. 405.1100.

As mentioned, supra,

Plaintiffs initially sought a redetermination in January of 2011. After receiving an
unfavorable decision, they then made a request for reconsideration and received
a partially favorable decision in September of 2011.

Subsequently, Plaintiffs

requested a hearing before an Administrative Law Judge in September of 2011,
which is still pending. Plaintiffs have yet to request an escalation to the MAC,
pursuant to 42 C.F.R. §405.1100, et seq. Moreover, Plaintiffs acknowledge that
they have not completed the administrative review process (doc. 1, ¶¶ 33-34).
As such, Defendants assert that Plaintiffs cannot bring an action against the
Secretary because they have failed to meet the jurisdictional requirements set
forth by Congress in 42 U.S.C. § 405(g), and the Court agrees.
Plaintiffs assert that in Mathews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893
(1976), the Supreme Court has recognized an exception to the exhaustion of
administrative remedies requirement. In Mathews, the Supreme Court held that
jurisdiction under section 405(g) is determined by a two prong test. First, there
must have been a presentment to the Secretary. Id., at 328; Affiliated Prof'l
Home Health Care Agency v. Shalala, 164 F.3d 282, 285 (5th Cir. 1999). This
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element can never be waived and no decision of any type can be rendered if this
requirement is not satisfied. Id. Second, the claimant must have exhausted his
administrative review.

Id.

Here, both parties agree that Plaintiffs have not

exhausted their administrative remedies.

However, Plaintiffs assert (and

Mathews provides) that exhaustion of administrative review may be waived.
Under Mathews, the claimant must satisfy a three-part test for the district
court to find that exhaustion of administrative remedies is not necessary. 424
U.S. 319, 330-32. The claim at issue must be (1) collateral to a substantive claim
of entitlement; (2) colorable in its showing that refusal of the relief sought will
cause an injury which retroactive payments cannot remedy; and (3) one whose
resolution would not serve the purposes of exhaustion. Id.
In Mathews, the Supreme Court held that the plaintiff's claim that a predeprivation hearing was constitutionally required was “entirely collateral” to his
substantive claim of entitlement. 424 U.S. at 330–32. There, the individual's
constitutional claim regarding his procedural rights involved an analysis of the
Supreme Court's jurisprudence on the Due Process Clause, which involved
completely separate issues from his challenge to the Secretary's decision to
terminate benefits.

The Mathews court noted that because of the plaintiff’s

“physical condition and dependency upon the disability benefits, an erroneous
termination would damage him in a way not recompensable through
retroactive payments. . .denying Eldridge's substantive claim. . . or upholding it.

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. . at the post-termination stage, would not answer his constitutional challenge.”
Id., at 331-32 (emphasis added).3
Here, although Plaintiffs have characterized their challenge as a
procedural due process claim that is entirely collateral to their substantive claim
of entitlement, the Court notes that it does not fall into the “entirely collateral”
exception set forth in the Mathews case. The Fifth Circuit has held that “the
constitutional tenor of a claim is not a determinative factor in deciding whether a
claim is collateral.

Instead, the exhaustion requirement is applicable to a

constitutionally-based claim when that claim is ‘inextricably intertwined’ with a
substantive claim of administrative entitlement.”

Affiliated Prof'l Home Health

Care Agency v. Shalala, 164 F.3d 282, 286 (5th Cir. 1999).
Plaintiffs assert that they are not seeking a factual determination from the
Court, they are merely seeking an injunction that would prevent Defendants from
recouping funds until Plaintiffs are able to exhaust their administrative remedies
(doc. 14, p. 4). Defendants assert that Plaintiffs’ claims would require the Court
to review the merits of the Secretary’s decision, and are, therefore, “inextricably
intertwined” and clearly not collateral, and the Court agrees (doc. 7-1, p. 6).
Plaintiffs’ claim that allowing Defendants to recoup earned Medicare
reimbursements without a hearing is a violation of their due process rights, which
is a direct challenge to the Secretary's substantive and initial determination that
3

The Court notes that in contrast to the plaintiff in Mathews, a denial or upholding of
Plaintiffs’ substantive claim will answer their constitutional challenge
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overpayments were made to Plaintiffs, and, therefore “inextricable intertwined”
with their substantive claim of entitlement (doc. 8-1, p. 7). A favorable resolution
of this claim would result in a cessation of the current recoupment process, a
process that was ordered by the Secretary. Therefore, the Court finds that the
“Mathews exception” does not apply to Plaintiffs, and Plaintiffs must exhaust their
administrative remedies prior to challenging the Secretary’s order in federal
district court.
Plaintiffs also assert that Shalala v. Il. Council on Long Term Care, Inc.,
529 U.S. 1, 120 S.Ct. 1084 (2000), “applies when there would be no review at all
in the agency” (doc. 14, p. 6).

Plaintiffs further assert that “the Secretary’s

determination of a sustained or high level of payment error is not subject to
administrative review, neither is the Secretary’s decision to reopen the claims at
issue” (doc. 14, p. 7). Moreover, Plaintiffs submit that “the Secretary has already
rendered final decisions on the use of extrapolation as a result of a high error
rate and whether or not there was good cause to reopen the claims at all” to
support their argument that the channeling requirement of exhaustion of
administrative remedies “has no place in this matter” (doc. 14, p. 7).
The Court declines to address the merits of this case before making a final
determination on subject-matter jurisdiction. However, the Court notes that the
injunctive relief requested by Plaintiffs—for the enjoinment of the recoupment of
funds throughout the duration of the administrative appeals process—is not
related to whether the use of extrapolation is a final decision pursuant to §§
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405(h) and (g), and, thereby, the Court would still be unable to grant Plaintiffs’
requested relief.
In McCarthy v. Madigan, 503 U.S. 140, 112 S.Ct. 1081, 117 L.Ed.2d 291
(1992), the Supreme Court held that a prisoner who sought only money damages
was not required to exhaust administrative remedies provided by Bureau of
Prisons' grievance procedure.4 The McCarthy case is not factually analogous to
the present case. However, the Supreme Court recognizes the importance of
exhaustion of administrative remedies when mandated by Congress.

In

McCarthy, the Supreme Court explained that “[o]f ‘paramount importance’ to any
exhaustion inquiry is congressional intent. Where Congress specifically
mandates, exhaustion is required. But where Congress has not clearly required
exhaustion, sound judicial discretion governs.” McCarthy, at 144 (internal
citations omitted). Therefore, as required by Congress and set forth in 42 U.S.C.
§ 405(h), the present action cannot be maintained in this Court. As such, the
Court finds that subject matter jurisdiction does not exist over this claim.

4

The issue in McCarthy is “whether a federal prisoner must resort to the internal
grievance procedure promulgated by the Federal Bureau of Prisons before he may initiate a
suit, pursuant to the authority of Bivens v. Six Unknown Fed. Narcotics Agents, 403 U.S. 388,
91 S.Ct. 1999, 29 L.Ed.2d 619 (1971), solely for money damages.” Id., at 141.
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CONCLUSION
For all of the foregoing reasons, the Motion to Dismiss is HEREBY
GRANTED (doc. 7), and this matter is HEREBY DISMISSED for lack of subject
matter jurisdiction. Plaintiffs’ Motion for a Temporary Restraining Order (doc. 8) is
HEREBY DENIED as moot.
Baton Rouge, Louisiana, August 10, 2012.

_____________________________
BRIAN A. JACKSON, CHIEF JUDGE
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

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