Care Origin, Inc. v. United States of America, Dept. of Health & Human Services et al

Filing 19

OPINION AND ORDER GRANTING MOTION TO DISMISS FEDERAL DEFENDANTS 15 AND DISMISSING COMPLAINT FOR LACK OF SUBJECT-MATTER JURISDICTION; TERMINATING 18 MOTION. Signed by District Judge Gershwin A. Drain. (DPar)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

CARE ORIGIN, INC.,
Case No. 14-cv-14686

Plaintiff,

UNITED STATES DISTRICT COURT JUDGE
GERSHWIN A. DRAIN

v.
UNITED STATES OF AMERICA,
DEPT. OF HEALTH & HUMAN SERVICES ET AL.,

UNITED STATES MAGISTRATE JUDGE
MICHAEL J. HLUCHANIUK

Defendant.
/
OPINION AND ORDER GRANTING MOTION TO DISMISS FEDERAL DEFENDANTS [15] AND
DISMISSING COMPLAINT FOR LACK OF SUBJECT-MATTER JURISDICTION
I. INTRODUCTION
On December 11, 2014, Plaintiff, Care Origin, Inc., filed a Complaint [1] against United
States of America Department of Health & Human Services, U.S. Department of Treasury’s
Community Health Accreditation Program, Centers for Medicare and Medicaid Services, and
National Government Services, Inc. (collectively, “Federal Defendants”), as well as PSAVD,
LLC and Cherry Catral (collectively, “Defendants-Counter Plaintiffs”). Dkt. No. 1, pp. 2–3
(Page ID # 2–3). Care Origin sought a declaratory judgment that it was not liable for repaying
Medicare overpayments and included three other counts related to misrepresentation and
damages. See id., pp. 3–8 (Page ID # 3–8). Since filing, Care Origin has voluntarily dismissed
Defendant Community Health Accreditation Program. See Dkt. No. 17.
This matter is before the Court on the Federal Defendants’ Motion to Dismiss [15]
pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction, filed
August 12, 2015. Dkt. No. 15., pp. 1–2 (Page ID # 79–80). Neither the Care Origin, nor the

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Defendants-Counter Plaintiffs filed a response to Federal Defendants’ Motion. For the reasons
discussed herein, the Court will GRANT the Federal Defendants’ Motion for Dismissal [15],
and DISMISS Federal Defendants from this action WITHOUT PREJUDICE.
II. BACKGROUND
Care Origin operated a home health agency that participated in Medicare and Medicaid.
Dkt. No. 1, p. 4, ¶ 17 (Page ID # 4). In September 2010, Care Origin sold its operations to
PSAVD, LLC (PSAVD), and filed paperwork with Centers for Medicare & Medicaid Services
(CMS) for approval of the change in ownership. Dkt. No. 1-1, p. 9 (Page ID # 20). The Asset
Purchase Agreement between the parties provided that closing would take place within 30 days
of the agreement’s signing and that Care Origin would continue operating the home health
agency until closing. Dkt. No. 15-2, p. 8 (Page ID # 119). CMS approved the parties’ change in
ownership on September 23, 2011, with an effective date of September 15, 2010. Dkt. No. 15-3,
p. 1 (Page ID # 124). Under the change of ownership, the existing provider’s agreement was
automatically assigned to the new owner, who was then subject to all terms and conditions of the
existing agreement. See id.
In April 2011, Care Origin entered into an agreement with PSAVD that allowed PSAVD
to provide patient services and bill CMS using Care Origin’s provider identifier. Dkt. No. 1-1,
p. 9 (Page ID # 20). Thereafter, CMS payments were deposited into Care Origin’s bank account
and Care Origin made payments to PSAVD. See id. Some of the bills submitted using Care
Origin’s provider identifier included Requests for Anticipated Payments (RAPs) from the home
health agency. Dkt. No. 1-1, p. 10 (Page ID # 21); Dkt. No. 15-6, pp. 2–3, ¶¶ 2–4 (Page ID
# 132–33). Payments were made to Care Origin’s bank account in response to RAPs from June

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through October 2011. See Dkt. No. 15-6, pp. 8–9, 22–23, 35, 48, 61–62, 74, 86–87, 99 (Page ID
# 138–39, 152–53, 165, 178, 191–92, 204, 216–17, 229).
After approving the change in ownership, CMS notified National Government Services
(NGS), the Medicare Administrative Contractor for home health agencies in Michigan, about the
ownership change on September 23, 2011. Dkt. No. 15-4 (Page ID # 127). That November, NGS
attempted to perform two unannounced site visits at PSAVD to ensure that the agency was still
operational. Dkt. No. 15-5, p. 1 (Page ID # 128). Upon finding that PSAVD was not operational,
NGS revoked the agency’s Medicare Billing Privileges, effective November 28, 2011. See id.
NGS subsequently attempted to recoup the outstanding RAP overpayments associated
with the provider identifier used by Care Origin and PSAVD. See Dkt. No. 15-6, pp. 5–107
(Page ID # 135–237). NGS sent eight letters from December 2011 through April 2012, seeking
total repayment related to RAPs in the amount of $262.909.14, plus interest. See id. Care Origin
responded to the first notice made on December 19, 2011, to inform NGS that the home health
agency had been sold to PSAVD and the overpayment letter would be forwarded accordingly.
See id., p. 115 (Page ID # 245).
Additionally, NGS sent a letter to Care Origin in December 2012, stating that an
additional overpayment in the amount of $172,718 existed, independent of RAP overpayments,
because Care Origin had not submitted its Medicare Cost Report for the fiscal year ending
November 28, 2011. See id. at 108–10 (Page ID # 238–40). When Care Origin failed to respond
to this notice, NGS referred the debt to the Department of Treasury for collection in February
2013. See id. at 111–114 (Page ID # 241–44).

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Care Origin filed the present Complaint on December 11, 2014, Dkt. No. 1 (Page ID # 1),
after its previous civil actions were dismissed by this Court without prejudice in October 2012,
November 2013, and September 2014.1
III. LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(1) authorizes a party to challenge the court's
subject matter jurisdiction. “Rule 12(b)(1) motions to dismiss for lack of subject-matter
jurisdiction generally come in two varieties: a facial attack or a factual attack.” Gentek Bldg.
Products, Inc. v. Sherwin-Williams Co., 491 F.3d 320, 330 (6th Cir. 2007) (citing Ohio Nat’l Life
Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir. 1990)). A facial attack questions the
sufficiency of the pleadings, taking all allegations in the complaint as true. Id. Conversely, in a
factual attack, there is no presumptive truthfulness and the district court must weigh conflicting
evidence to determine whether or not subject-matter exists. Id.
Under Rule 12(b)(1), the plaintiff bears the burden of proving jurisdiction in order to
survive the motion. Rogers v. Stratton Indus., Inc., 798 F.2d 913, 915 (6th Cir. 1986). “A court
lacking jurisdiction cannot render judgment but must dismiss the cause at any stage of the
proceedings in which it becomes apparent that jurisdiction is lacking.” Sweeton v. Brown, 27
F.3d 1162, 1169 (6th Cir. 1994) (quoting United States v. Siviglia, 686 F.2d 832, 835 (10th Cir.
1981), cert. denied, 461 U.S. 918 (1983)).
IV. ANALYSIS
In its Complaint, Care Origin asserts that the Court has the power to adjudicate this
matter under the Federal Claims Collection Act, 31 U.S.C. § 3711 et. seq. Dkt. No. 1, p. 5 (Page

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Case No. 4:12-cv-12307-GAD-MJH (dismissed without prejudice after Plaintiff failed to serve Defendants
within 120 days after filing the complaint); Case No. 2:13-CV-11944-GAD-MJH (dismissed without prejudice after
Plaintiff’s counsel failed to attend status conference and was unable to be contacted); Case No. 2:14-CV-11259GAD-MJH (dismissed without prejudice for failure to prosecute).
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ID # 5). However, as Federal Defendants correctly point out, the Federal Claims Collection Act
does not provide for a private right of action against the United States. See Dkt. No. 15, p. 16
(Page ID # 102); 31 C.F.R. § 900.8 (“The standards in this chapter do not create any right or
benefit, substantive or procedural, enforceable at law or in equity by a party against the United
States, its agencies, its officers, or any other person, nor shall the failure of an agency to comply
with any of the provisions of parts 900–904 of this chapter be available to any debtor as a
defense.”).
Thus, it is necessary to see if Care Origin’s claims lie under the Medicare Act. “Section
405(h) of the Social Security Act, made applicable to the Medicare Act by 42 U.S.C. § 1395ii,
strips courts of general federal question jurisdiction under 28 U.S.C. § 1331 for claims arising
under the Medicare Act.” Triad at Jeffersonville I, LLC v. Leavitt, 563 F. Supp. 2d 1, 12 (D.D.C.
2008). Specifically, the section states:
No findings of fact or decision of the Secretary shall be reviewed by any person,
tribunal, or governmental agency except as herein provided. No action against the
United States, the Secretary, or any officer or employee thereof shall be brought
under section 1331 or 1346 of Title 28 to recover on any claim arising under this
subchapter.
42 U.S.C. § 405(h). “As so interpreted, § 405(h)’s bar reaches beyond ordinary administrative
law principles of ‘ripeness’ and ‘exhaustion of administrative remedies’—doctrines that
normally require channeling a legal challenge through the agency—by preventing the application
of exceptions to those doctrines.” Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S.
1, 2 (2000).
Section 405(g)2 provides “the only avenue for judicial review” of claims arising under the
Medicare Act. See Heckler v. Ringer, 466 U.S. 602, 617 (1984). “[T]he exhaustion requirement

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Section 405(g) was incorporated into the Medicare Act by 42 U.S.C. § 1396i(b)(2).
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of § 405(g) consists of [1] a nonwaivable requirement that a ‘claim for benefits shall have been
presented to the Secretary,’ and [2] a waivable requirement that the administrative remedies
prescribed by the Secretary be pursued fully by the claimant.” Id. (citations omitted); see also
Cathedral Rock of N. Coll. Hill, Inc. v. Shalala, 223 F.3d 354, 359 (6th Cir. 2000) (“The
Supreme Court … held that ‘all aspects’ of a present or future claim for benefits must be
‘channeled’ through the administrative process.”).
Thus, a party wishing to bring a claim arising under the Medicare Act must have
presented a claim to the Secretary and exhausted its administrative remedies prior to filing suit in
federal court. See, e.g., Buckner v. Heckler, 804 F.2d 258, 258 (4th Cir. 1986) (finding that an
overpayment constituted disputed Medicare benefits and affirming dismissal of a declaratory
judgment action for failure to exhaust administrative remedies). “The fact that the agency might
not provide a hearing for that particular contention, or may lack the power to provide one … is
beside the point because it is the ‘action’ arising under the Medicare Act that must be channeled
through the agency.” Illinois Council, 529 U.S. at 23, (internal citations omitted); see also BP
Care, Inc. v. Thompson, 398 F.3d 503, 511 (6th Cir. 2005) (“[Section] 405(h) applies unless
requiring agency review of the plaintiff's claim would effectively mean ‘no review at all.’ ”)
A. Care Origin’s Claims Arose Under the Medicare Act
The Supreme Court determined in Ringer that a claim arises under the Medicare Act if
“both the standing and the substantive basis for the presentation” of the claim is the Medicare
Act. 466 U.S. at 615 (quoting Weinberger v. Salfi, 422 U.S. 749, 760–61 (1975)). Additionally, a
claim may arise under the Act if it is “inextricably intertwined” with a claim for Medicare
benefits. See id. at 624.

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The present action arises under the Medicare Act, as Care Origin has challenged Federal
Defendants attempts to collect Medicare overpayments and its liability for those overpayments.
See Dkt. No. 1, pp. 3–4, ¶¶ 12, 16 (“This action further arises out of the Medicare and Medicaid
enrollment, provider and participant documents, rules and regulations resulting in provider
number 1245342310 and CCN: 23-7545.”). Accordingly, the Medicare Act’s judicial review
limitations apply.
B. Plaintiff Failed to Meet the Exhaustion Requirement of 405(g)
Even read in the light most favorable to Care Origin, the facts alleged in the Complaint
satisfy neither of the two criteria necessary for judicial review of a Medicare determination:
presentation of a claim to the Secretary and full pursuit of administrative remedies.
Only one letter has been submitted regarding to Care Origin’s contention that PSVAD
was responsible for the overpayments. See Dkt. No. 15-6, p. 115 (Page ID # 245). In that letter,
dated January 5, 2012, Care Origin notified NGS that it had been sold to PSAVD and that CMS
had approved its change in ownership. Id. The letter further stated that Care Origin would
forward the overpayment letter to PSAVD and request that they comply. Id. Care Origin did not
dispute the overpayment or liability. See id. Thus, this letter does not present a claim to the
Secretary, a nonwaivable requirement prior to seeking judicial review. Additionally, there is no
evidence that Care Origin took any steps to exhaust its administrative remedies or that the
Secretary has waived this requirement.
V. CONCLUSION
For the reasons discussed above, the Court finds there is no subject-matter jurisdiction
against Federal Defendants in this case. The Court HEREBY GRANTS the Motion to Dismiss
[15]. Additionally, since all remaining parties are non-diverse and no federal claims remain, the
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Court HEREBY DISMISSES this action WITHOUT PREJUDICE for lack of subject-matter
jurisdiction.
IT IS SO ORDERED.
Dated: October 20, 2015
Detroit, Michigan

s/Gershwin A. Drain
GERSHWIN A. DRAIN
United States District Judge

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