New vision Home Health Care Inc et al v. Anthem, Inc. et al

Filing 38

OPINION AND ORDER GRANTING DEFENDANTS' MOTION FOR RECONSIDERATION 32 AND GRANTING DEFENDANTS' MOTION TO DISMISS 20 Signed by District Judge Victoria A. Roberts. (CPin)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
NEW VISION HOME HEALTH CARE, INC., ET AL.,
Plaintiffs,
v.

Case No.: 16-13173

ANTHEM, INC., ET AL.,
Defendants.
_____________________________/
OPINION AND ORDER GRANTING
DEFENDANTS’ MOTION FOR RECONSIDERATION (Doc. # 32) and
GRANTING DEFENDANTS’ MOTION TO DISMISS (Doc. #20)

This matter is before the Court on Defendants’ Motion for Reconsideration. The
Court finds there was a palpable defect by which it and the parties were misled in
issuing its first Order. By addressing it, a different outcome is warranted. Loc. Civ. R.
701(h)(3). Accordingly, the Court GRANTS Defendant’s Motion for Reconsideration and
GRANTS Defendants’ Motion to Dismiss. This revised order addresses the issues
raised by both defense motions.
I.

STATEMENT OF FACTS
New Vision Home Health Care, Inc., and Saleem Shakoor, the owner of New

Vision (collectively, “New Vision”), filed suit against National Government, Inc.,
TrustSolutions, LLC, and Anthem, Inc. (collectively “Defendants”). New Vision’s Second
Amended Complaint (“SAC”) contains eight claims: Count I – writ of mandamus for
enforcement of the ALJ’s September 4, 2013 decision (Contractors Within Course and
Scope); Count II – writ of mandamus for enforcement of the ALJ’s September 4, 2013

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decision (Contractors Outside of Course and Scope and Failed to Exercise Due Care);
Count III – negligence; Count IV – gross negligence; Count V – tortious interference
with business relationships and expectancies; Count VI – violation of right to procedural
due process; Count VII – declaratory judgment; and, Count VIII – injunction.
Defendants are government contractors for the Medicare program administered
by the U.S. Department of Health and Human Services (“HHS”). New Vision submits
Medicare claims to Defendants; they determine how much Medicare must pay New
Vision for home health care services.
In 2007, Defendants initiated an audit of New Vision’s Medicare claims for dates
of service from May 8, 2003 through October 3, 2006. Defendants paid these disputed
claims, from January 1, 2004 to December 10, 2006. Subsequently – through an audit
sample – Defendants concluded that it overpaid New Vision $672,493.57 for claims for
dates of service May 8, 2003 through October 6, 2006. Defendants then used a
statistical extrapolation formula to calculate an estimated total overpayment to New
Vision of $4,155,239.00 (“Disputed Amount”) for that period.
In its Second Amended Complaint, New Vision says from October 2010 to the
present, Defendants have not paid any claims New Vision has submitted, and that
Defendants have withheld payments in order to recoup the Disputed Amount. (SAC ¶
42 and 43). However, in papers filed in connection with Defendants’ motions, New
Vision says Defendants have withheld payments since 2006 (Doc. # 36; Pg ID 1145).
For purposes of this Opinion, the Court will use the 2006 date.
In 2008, New Vision filed a claim through the Medicare Appeal Process over the
Disputed Amount for 2003-2006. The Administrative Law Judge (“ALJ”) ruled in its

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favor. Defendants appealed the decision through the Medicare Appeals Council
(“MAC”). The MAC remanded for a new ALJ hearing. On June 7, 2012, the ALJ
conducted a hearing. New Vision presented arguments contesting the validity of the
methodology the Defendants used to determine the estimated overpayment. It also
presented reports from a statistical expert who analyzed Defendants’ data and
methodology. Defendants’ evidence included medical records and an analysis of each
medical claim submitted by New Vision between 2003 and 2006.
In his decision, the ALJ set forth the issue before him: “whether New Vision
received and retained the total overpayment amount identified by [Defendants] … , and
if so, whether [New Vision] is liable for return of the amount the [Defendants] calculated
by extrapolation based upon its findings from its medical reviews of the claims in a
statistical sample it had drawn.” [Doc. 18-1; Pg ID 451]. To resolve this issue, the ALJ
went through each of the 228 claims at issue and listed the amount of overpayment
amount, if any, for that claim.
The ALJ entered a decision on September 4, 2013 that was partially favorable to
New Vision; instead of being required to pay the entire Disputed Amount, the ALJ
concluded that New Vision was overpaid only $35,872.28; this is the amount New
Vision had to return to Defendants.
The ALJ stated these conclusions of law:
1. Some of the claims New Vision submitted to Defendants met the Medicare
coverage criteria.
2. The reimbursements Defendants made for those claims to New Visions were
appropriate and did not constitute overpayments.

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3. Other home care services New Vision provided did not meet Medicare coverage
criteria and/or condition for payment, and New Vision was overpaid for those
claims.
4. The statistical sampling and methodology Defendants used to calculate the
overpayment had numerous defects, which diminished the reliability and
probative value of the evidence.
5. Because the sample was not valid, the resulting amount of the overpayment,
calculated by extrapolation for the universe of claims, was not valid.
6. The overpayment amount subject to recovery was limited to the actual
overpayment amounts based upon the ALJ’s dispositions after conducting 
individual reviews of the medical records related to the episode claims in the
sample and the claim lines there.
[Doc. #18-1; Pg ID 739].
The ALJ made no findings of fact or conclusions of law pertaining to the amounts
Defendant withheld after 2006. Nor were there findings concerning the claims made by
New Vision in Counts III-VIII.
The decision ended with this order:
“The Medicare contractors are hereby DIRECTED to process the
claims and claim lines at issue in accordance with this decision. Any
amounts recouped or otherwise recovered from the Provider based
upon the invalid overpayment demands herein shall be returned to the
Appellant.”
[Doc. #18-1; Pg ID 740].

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This order required Defendants to return to New Vision any amounts it
had “recouped” from New Vision based on the Disputed Amount.
Neither party appealed the ALJ’s decision to the MAC.
After the ALJ decision issued, Defendants sent New Vision a letter demanding
$41,676.65. Defendants calculated that amount by reducing the $35,872.28 to
$29,989.11 (reflecting New Vision earlier payments), and adding $11,686.54 interest.
New Vision has not paid anything in response to Defendants’ letter.
Since 2006, New Vision says it has not received any reimbursements
for services from Defendants. New Vision claims Defendants did not pay
reimbursements on new claims New Vision submitted, because Defendants
were still attempting to collect on the Disputed Amount, most of which the
ALJ said New Vision did not owe. New Vision relies on the ALJ’s language in
his one paragraph order to argue that the ALJ directed Defendants to pay
New Vision amounts they withheld beginning in 2006.
On the other hand, Defendants say they did not recoup or recover any
amount from New Vision post 2006 that had anything to do with the Disputed
Amount. And, Defendants say they still have not received the $41,675.65
they demanded in 2013.
The Court finds:
1.

New Vision cannot seek a writ of mandamus with respect to

Counts I and II; it failed to exhaust administrative remedies on its
lawsuit allegations that the amounts Defendants withheld beginning in

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2006 were related to 2003-2006 claims and were intended to collect on
the Disputed Amount;
2.

The ALJ did not impose a clear nondiscretionary duty on

Defendants to pay New Vision funds that it withheld beginning in 2006; and
3.

New Vision failed to exhaust administrative remedies on claims

set forth in Counts III-VIII.
II.

STANDARD OF REVIEW
a. Motion to Dismiss 12(b)(1)
The Defendants move to dismiss all counts of New Vision’s Second Amended

Complaint, pursuant to Rules 12(b)(1). They say the Court lacks subject matter
jurisdiction because New Vision failed to exhaust administrative remedies for claims
arising under the Medicare Act, before filing suit; exhaustion is required for any civil
action brought under 42 U.S.C. § 405(2).
“A motion to dismiss an action under Rule 12(b)(1) raises the question of the
federal court's subject matter jurisdiction over the action.” 5A Charles Alan Wright &
Arthur R. Miller, Federal Practice and Procedure § 1350, at 194 (2d ed.1990). The
Plaintiff bears the burden to prove jurisdiction. See generally RMI Titanium Co. v.
Westinghouse Elec. Corp., 78 F.3d 1125, 1134–35 (6th Cir.1996); see also Rogers v.
Stratton Indus., 798 F.2d 913, 915 (6th Cir.1986). “When considering a motion to
dismiss for lack of subject matter jurisdiction, this Court may look beyond jurisdictional
allegations in the complaint and the Court may consider whatever evidence the parties
submit.” Fairport Int'l. Exploration, Inc. v. Shipwrecked Vessel Known as THE CAPTAIN

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LAWRENCE, 105 F.3d 1078, 1081 (6th Cir.1997), vacated on other grounds. 523 U.S.
1091, 118 S.Ct. 1558, 140 L.Ed.2d 790 (1998).
Under 28 U.S.C. § 1331, federal district courts “have original jurisdiction of all
civil actions arising under the Constitution, laws, or treaties of the United States.” 28
U.S.C. § 1331. The jurisdiction conferred on federal courts by this statute is commonly
referred to as “federal question” jurisdiction.
In cases such as this – where there is a challenge to the allocation of costs under
Medicare – Congress prescribed a specific and exclusive method for judicial review of
disputes arising under the Medicare program. See Michigan Ass'n of Homes and
Services For Aging v. Shalala, 127 F.3d 496, 497 (6th Cir.1997); Michigan Ass'n of
Indep. Clinical Labs. v. Shalala, 52 F.3d 1340, 1344–46 (6th Cir.1994). In particular,
Congress limited federal court jurisdiction by expressly incorporating 42 U.S.C. § 405(h)
of the Social Security Act into the Medicare Act. See 42 U.S.C. § 1395ii. This section
provides: “No finding 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).
b. Administrative Process
Before federal courts can exercise subject matter jurisdiction over Medicare
claims, a plaintiff must fully exhaust administrative remedies and obtain a final decision
from HHS. See 42 U.S.C. § 1395ff(b)(1)(A) (limiting judicial review to reconsideration of
the Secretary's “final decision,” reached at the conclusion of the administrative review

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process); see also Weinberger v. Salfi, 422 U.S. 749, 764-766 (1975) (holding a “final
decision” is “central to the requisite grant of ... jurisdiction” and therefore is a “statutorily
specified jurisdictional prerequisite” to suit).
A plaintiff must follow a five-step process to fully exhaust administrative
remedies: (1) After a party receives a denial of its claim, the first level of appeal is
invoked by requesting a redetermination by the fiscal intermediary carriers. 42 U.S.C. §
1395ff(a)(3); 42 C.F.R. § 405.940; (2) A party who is not satisfied with the
redetermination can seek reconsideration by a Qualified Independent Contractor. 42
U.S.C. § 1395ff(b)(1)(A); 42 C.F.R. § 405.960; (3) A party not satisfied with the decision
of the Qualified Independent Contractor may request a hearing before an Administrative
Law Judge. The ALJ conducts a hearing and issues a decision. The ALJ’s decision is
final and binding on all parties unless a party requests further review by the MAC within
sixty days of the ALJ’s decision; 42 C.F.R. §§ 405.1000; (4) If a party requests review
by the MAC, the MAC will review the case and issue a final agency decision; 42 U.S.C.
§ 1395ff(d)(2); and (5) any party may file a civil suit in federal district court once the
Secretary of HHS renders a final decision. 42 U.S.C. § 1395ff(b)(1)(A); 42 C.F.R. §§
405.1002, 405.1006, 405.1014(b).
c. Writ of Mandamus
To seek a writ of mandamus New Vision must show it “has exhausted all other
avenues of relief” and the Defendants owe New Vision “a clear nondiscretionary duty.”
BP Care, Inc. v. Thompson, 398 F.3d 503, 515 (6th Cir. 2005) citing Heckler v. Ringer,
466 U.S. 602, 616 (1984).

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III.

DISCUSSION

A. COUNTS I AND II
1. New Vision did not fully exhaust administrative
remedies.
New Vision seeks a writ of mandamus under 28 U.S.C. §1361 to enforce the
ALJ’s 2013 decision, which neither party appealed to the MAC.
Defendants first argue that the Court does not have subject matter jurisdiction
over Counts I and II because New Vision failed to exhaust administrative remedies
when it did not appeal the ALJ’s 2013 decision. New Vision argues it had no obligation
to appeal what it calls a decision in its favor and for which it only seeks enforcement.
But, what is the decision that New Vision wants enforced? Certainly it is not the decision
that it owes Defendants $35,872.28. Instead, New Vision wants this Court to order
Defendants to pay New Vision amounts withheld beginning in 2006 because New Vision
says this is what the ALJ ordered Defendants to do. New Vision says Defendants are
still trying to recover the Disputed Amount through these withholdings.
Defendants say there is no final decision from the MAC that requires them to pay
New Vision withholdings beginning in 2006. Further, Defendants say these withholdings
had nothing to do with the 2003 through 2006 Disputed Amount.
New Vision’s argument is without merit. There were no findings of fact or
conclusions of law that pertain to the funds Defendants withheld from New Vision
beginning in 2006, nor was there a finding that Defendants withheld funds beginning in
2006 to continue to collect on the Disputed Amount. Furthermore, the ALJ made no
finding that Defendants had to pay New Vision a specific amount (or a finding that there
was any amount).

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Since neither party requested review by the MAC, and since the MAC never
issued a final decision on whether Defendants withheld funds starting in 2006 to collect
on the Disputed Amount, neither party can take advantage of the last step in the
statutorily mandated process, which is to file a claim in federal district court.
New Vision relies on Wolcott v. Sebelius, 635 F.3d 757 (5th Cir. 2011). In
Wolcott, the ALJ found that the plaintiff was entitled to Medicare payments for services
rendered. The ALJ ordered defendants to process plaintiff’s claims. The defendants did
not pay the plaintiff for services rendered nor did they process new claims. The plaintiff,
a health care provider, sued defendants, the Secretary of HHS and a Medicare carrier,
asserting five claims for mandamus because the defendants failed to process and pay
claims, only some of which were successfully appealed at the administrative level. The
defendants filed a motion to dismiss for lack of subject matter jurisdiction, claiming the
plaintiff did not exhaust administrative remedies as required by 42 U.S.C. §405.
On appeal, the Fifth Circuit found that the ALJ’s decisions favorable to the
plaintiff’s claims were final because the “plaintiff does not seek a redetermination of
administrative decisions concerning its right to benefits, but rather the enforcement of
these administrative decisions.” Wolcott, 635 F.3d 757, 764.
First and foremost, the Court in Wolcott only asserted mandamus jurisdiction
over claims in which it found defendants owed a “clear non-discretionary duty to act”
after a “fully favorable” ALJ decision. Wolcott at 768. As the Court discusses below,
Defendants here do not have a clear nondiscretionary duty to pay New Vision anything.
Additionally, the Sixth Circuit rejected the Wolcott rationale several years before the
Wolcott decision, in BP Care, 398 F.3d 503, 514-15 (6th Cir. 2005).

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New Vision also relies on Pritchett v. Comm'r of Soc. Sec., 2005 U.S. Dist. LEXIS
46965 (E.D. Mich. 2005). In Pritchett, the plaintiff sought enforcement of the Social
Security Appeals Council’s decision to reinstate her benefits. The Court found that
mandamus jurisdiction was not precluded as a matter of law by 42 U.S.C. § 405(g),
when a plaintiff obtains favorable ALJ and Appeals Council’s decisions, and a defendant
has a clear obligation to pay back benefits. The Court stated: "the [Social Security] Act
does not preclude the exercise of mandamus jurisdiction," finding that "the actions of
the Secretary of Health and Human Services challenged . . . constitute such a complete
abnegation [sic] of the Secretary's statutory responsibilities that issuance of the writ is
warranted." Pritchett, 2005 U.S. Dist. LEXIS 46965, op. at 12, quoting Ganem v.
Heckler, 746 F.2d 844, 845-846 (D.C. Cir. 1984).
Pritchett is not on point. The plaintiff in Pritchett did exhaust administrative
remedies through the MAC; the MAC rendered a final agency decision, which gave the
plaintiff authority to file a claim in federal district court. In contrast, New Vision has not
exhausted administrative remedies.
Defendants rely on BP Care, Inc. v. Thompson to argue that Sixth Circuit
precedent disallows mandamus jurisdiction when a party has not met exhaustion
requirements.
In BP Care, the plaintiff “contested the Department of Health and Human
Services’ policy of imposing successor liability for money penalties incurred because of
a violation of a Medicare provider agreement.” BP Care, Inc., 398 F.3d at 506. The
successor owner abandoned the administrative process which ended when the ALJ
dismissed the previous owner’s challenge without a hearing. The successor filed suit in

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federal court claiming that the ALJ’s dismissal without a hearing “removed any available
administrative remedies.” Id. at 506.
The Sixth Circuit held that the plaintiff failed to exhaust administrative remedies,
therefore barring mandamus jurisdiction; it concluded that the successor owner had
failed to complete the administrative process and failed to exhaust “all other avenues of
relief.” Id. at 514-15.
As the statutes and case law make clear, a party seeking mandamus relief must
first demonstrate exhaustion. Neither the ALJ nor MAC rendered a final agency decision
on whether Defendants withheld funds beginning in 2006 to collect on the Disputed
Amount, and whether Defendants were required to reimburse New Vision.
Because the Court finds New Vision did not fully exhaust administrative remedies
for Counts I and II, it does not meet the first requirement for a writ of mandamus.
2.

Defendants do not owe New Vision a clear
nondiscretionary duty.

The ALJ never concluded that Defendants had a duty to pay New Vision a
specific amount of money. Defendants rely on Maczko v. Joyce, 814 F.2d 308 (6th Cir.
1987) to argue Sixth Circuit precedent dictates that mandamus jurisdiction is not proper
because New Vision did not meet the clear duty requirement for mandamus relief.
In Maczko, the plaintiff sought enforcement of an Equal Employment Opportunity
Commission (“EEOC”) decision in her favor. Maczko, 814 F.2d at 309. The Sixth Circuit
held that even though the plaintiff fully exhausted administrative remedies, the district
court lacked subject matter jurisdiction and the plaintiff was not entitled to mandamus

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relief, because the EEOC did not clearly state what relief the defendant owed the
plaintiff. Id. at 310-11.
The EEOC ordered: “the Complainant be reinstated with reasonable
accommodation; be awarded back pay, seniority and benefits that may have accrued
since the effective date of the denial of the Complainant's request for light duty
deducting any duplicative award the Complainant may have received prior to the
issuance of this decision.” Id. at 309.
The Sixth Circuit reasoned that the terms of the EEOC order were not “readily
ascertainable” because the parties disagreed over its meaning, and did not seek
clarification from the EEOC. Id. In addition, the EEOC did not order the defendants to
pay a specific amount to the plaintiffs for back pay.
Maczko is on point. New Vision and Defendants dispute the meaning of the ALJ’s
order, and the ALJ did not issue a decision that made it clear to the Defendants that
they have a clear, nondiscretionary duty to reimburse New Vision for monies recouped
beginning in 2006.
New Vision fails to meet the second requirement for a writ of mandamus: it does
not demonstrate that Defendants had a clear, nondiscretionary duty to pay New Vision
for amounts withheld beginning in 2006.
In sum, the Court lacks subject matter jurisdiction over Counts I and II.
B. COUNTS III THROUGH VIII
1. New Vision did not fully exhaust administrative remedies.
In Counts III through VIII, New Vision seeks compensatory and consequential
damages based on negligence, gross negligence, tortious interference with business

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relationships, and due process violations. It also seeks declaratory and injunctive relief.
New Vision argues it presented evidence to the ALJ of the Defendants’ negligence, lack
of due care, and violations of New Vision’s due process rights, and it says the ALJ
commented on Defendants’ violations in his decision. Defendants argue that New Vision
did not raise state law tort claims during the administrative process. Hence, Defendants
argue that the Court does not have subject matter jurisdiction over these counts
because New Vision failed to exhaust administrative remedies. The Court agrees.
For these claims, New Vision must show that it fully exhausted administrative
remedies by following the five-step process described above. To enforce at step five,
New Vision must seek enforcement of a final decision. See 42 U.S.C. § 1395ff(b)(1)(A).
The ALJ’s final decision in 2013 only upheld New Vision’s position that it had not
been overpaid over four million dollars for its claims from May 8, 2003, through October
3, 2006. This was the only issue before the ALJ: “whether New Vision received and
retained the total overpayment amount identified by [Defendants]…, and if so, whether
[New Vision] is liable for return of the amount the [Defendants] calculated by
extrapolation based upon its findings from its medical reviews of the claims in a
statistical sample it had drawn.” [Doc. 18-1; Pg ID 451].
The ALJ final decision was not based on negligence, gross negligence, tortious
interference with business relationships, or due process violations.
New Vision argues several comments in the ALJ’s findings show he found the
Defendants lacked due care and they violated New Vision’s right to due process of law.
These comments included:
“TrustSolutions' letter failed to include at least five of the mandatory
elements. . . . TrustSolutions failed to comply with the above MPIM

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requirements and exhibited disregard for the CMS instructions to
auditors.”
(Dkt. 18-1, ALJ Decision, PgID 705. Emphasis added.)
TrustSolutions did not use care in defining the sampling unit that
served as the basis for its statistical sampling.

(Dkt. 18-1, ALJ Decision, PgID 708. Emphasis added.)
[T]he PSC did not demonstrate even substantial compliance with
the instructions set forth in chapter 3 of the MPIM.

(Dkt. 18-1, ALJ Decision, PgID 716. Emphasis added.)
As with most rights, the right to recover Medicare overpayment is not
without responsibilities. Those duties attendant to the right to recover
overpayments, especially the necessity of protection of due process,
have not been faithfully executed.
(Dkt. 18-1, ALJ Decision, PgID 729. Emphasis added.)
The comments, at best, were dicta, and not part of or the basis for the final
decision. New Vision did not direct the Court to any part of the ALJ’s findings of fact or
conclusions of law that addressed negligence, gross negligence, tortious interference
with business relationships, declaratory or injunctive relief. The ALJ did not render a
final decision or order specific to the claims in Counts III-VIII.
Because New Vision did not fully exhaust administrative remedies for Counts IIIVIII inasmuch as it did not follow the five-step process set forth in 42 U.S.C. § 1395ff,
the Court lacks subject matter jurisdiction over Counts III-VIII.
IV.

CONCLUSION
The Court GRANTS Defendant’s Motion for Reconsideration and GRANTS

Defendants’ Motion to Dismiss Counts I-VIII.

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IT IS ORDERED.

Dated:  8/28/17 

  /s/ Victoria A. Roberts   
Victoria A. Roberts 
United States District Judge 

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