Integrated Nursing & Health Services Inc. v. Centers For Medicare & Medicaid Services
MEMORANDUM OPINION AND ORDER. 1. Plaintiff's Amended Complaint (Doc. No. 12 ) is DISMISSED WITHOUT PREJUDICE. 2. Plaintiff's Motion for a Temporary Restraining Order (Doc. No. 13 ) is DENIED. (Written Opinion) Signed by Judge Donovan W. Frank on 4/13/2017. (BJS)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Integrated Nursing & Health Services Inc.,
Civil No. 17-683 (DWF/KMM)
OPINION AND ORDER
Centers for Medicare & Medicaid Services,
Todd Franck, Esq., Franck Law Office, counsel for Plaintiff.
Ana H. Voss and James S. Alexander, Assistant United States Attorneys, United States
Attorney’s Office, counsel for Defendant.
This case involves a dispute arising from Defendant Centers for Medicare &
Medicaid Services’ (“CMS”) decision to suspend Medicare reimbursements to Plaintiff
Integrated Nursing & Health Services, Inc. (“INHS”) after CMS concluded that there
were credible allegations of Medicare fraud. INHS has moved for a temporary
restraining order releasing the suspended payments. CMS argues, among other things,
that the Court lacks subject matter jurisdiction. For the reasons discussed below, the
Court concludes that it lacks subject matter jurisdiction. The Court therefore denies
Plaintiff’s Motion for Temporary Restraining Order (Doc. No. 13) and dismisses
Plaintiff’s Amended Complaint (Doc. No. 12 (“Am. Compl.”)) without prejudice.
INHS is a Minnesota corporation that provides home-healthcare services in mostly
Hennepin County, Minnesota. (See Am. Compl. ¶ 7.) INHS employs 17 people and
provides services to approximately 40 homebound patients. (Doc. No. 17 ¶¶ 4-5.) CMS
is a federal agency vested with overseeing, among other things, the Medicare
reimbursement program. Here, CMS used AdvanceMed, a Medicare contractor, as its
main contact point between the parties.
Pursuant to Medicare’s regulations, CMS may suspend Medicare reimbursements
“in whole or in part” if it has been “determined that a credible allegation of fraud exists
against a provider or supplier.” 42 C.F.R. § 405.371(a)(2). The suspension can occur
with or without prior notice. If, as here, the suspension occurs without prior notice, CMS
must still offer the healthcare provider the opportunity to submit rebuttal information “as
to why the suspension should be removed.” Id. § 405.372(b)(2). If CMS decides,
however, that despite the rebuttal evidence, the suspension will continue, then the
healthcare provider does not have a right to appeal until a final determination on the fraud
allegations. See id. § 405.375(c). 1
A healthcare provider, however, is not without recourse. CMS is required to
reevaluate the suspension every 180 days to determine, among other things, whether good
cause exists to lift the suspension in whole or in part. Id. § 405.371(b)(2)(i). One of the
bases for good cause is that the “beneficiary access to items or services would be so
jeopardized by a payment suspension in whole or part as to cause a danger to life or
health.” Id. § 405.371(b)(1)(ii).
On January 31, 2017, AdvanceMed notified INHS by letter that CMS had
suspended Medicare reimbursements after receiving credible allegations of Medicare
fraud. (Doc. No. 12-1 (the “Suspension Letter”).) The Suspension Letter identified five
examples of suspected submissions and stated that while the investigation was ongoing,
all of Plaintiff’s Medicare reimbursements would be reviewed and withheld in an escrow
account. The Suspension Letter also stated that the suspension had been in place since
January 24, 2017. The Suspension Letter gave the Plaintiff an opportunity to reply, but
also explained that the Plaintiff had no right to appeal. (Id.)
On February 6, 2017, Plaintiff replied essentially asking for more details about the
fraud allegations. (Doc. No. 12-2.) Plaintiff also submitted documentation to
authenticate the allegedly fraudulent submissions identified in the Suspension Letter.
(Id.) AdvanceMed wrote back on February 24, 2017, stating that the suspension would
continue based on federal indictments alleging that INHS’s owner Roylee Belfrey was
involved in a scheme to commit Medicare fraud. (Doc. No. 12-3.) AdvanceMed also
stated that CMS would not review the documentation provided by Plaintiff because CMS
had reason to question the documents’ accuracy given the indictments. (Id.) The letter
reiterated that the decision to suspend payments was not appealable. (Id.)
On March 30, 2017, Plaintiff filed its Amended Complaint alleging four claims
that all essentially seek the same remedy: an order releasing the escrowed payments.
First, Plaintiff seeks mandamus relief to release the suspended payments based on CMS’s
refusal to review the documentation supporting the allegedly fraudulent claims. Second,
Plaintiff alleges that it was defrauded by CMS when CMS stated in the Suspension Letter
that it would review rebuttal documentation, but then refused to do so. As a result of the
fraud, INHS alleges that it has suffered $228,000 in damages (the amount of the
suspended payments). Third, Plaintiff alleges that CMS breached an unidentified
statutory and fiduciary duty by failing to review the rebuttal documents. And fourth,
Plaintiff alleges that its constitutional due-process and equal-protection rights were
violated when CMS did not undertake a proper review of the rebuttal evidence.
On April 4, 2017, Plaintiff moved for a temporary restraining order requiring
Defendant to release the suspended funds. (Doc. No. 13.) Plaintiff argues that unless the
suspended funds are released, it will have to close. In its response, CMS argues that the
Court lacks subject matter jurisdiction. (Doc. No. 22.) 2
Subject matter jurisdiction is a threshold issue that can be raised sua sponte by the
Court’s own motion. Hart v. United States, 630 F.3d 1085, 1089 (8th Cir. 2011); see also
13 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice &
Procedure § 3522 (3d ed. 1998 & Supp. 2017). “It is well established that a court has a
special obligation to consider whether it has subject matter jurisdiction in every case.”
Hart, 630 F.3d at 1089. Federal courts draw their jurisdiction from two sources: the U.S.
The Court will cite to Plaintiff’s Memorandum in Support of Motion for
Temporary Restraining Order (Doc. No. 15) as “Memo.” The Court will cite to
Defendant’s Response to Motion for Temporary Restraining Order (Doc. No. 22) as
Constitution and a particular statute. Wright & Miller § 3522. A court must have both a
constitutional and statutory basis to exercise jurisdiction. Id. At issue here is whether the
Court has a statutory basis to exercise jurisdiction.
The party asserting jurisdiction has the burden of proof. V S Ltd. P’ship v. Dep’t
of Hous. & Urban Dev., 235 F.3d 1109, 1112 (8th Cir. 2000). Subject matter jurisdiction
may be challenged either on the face of the plaintiff’s complaint or the factual
truthfulness of its allegations. Osborn v. United States, 918 F.2d 724, 729 n.6 (8th Cir.
1990). For a facial challenge—that is, even if the allegations were true, they lack an
essential element for jurisdiction—a court reviews the pleadings alone and assumes the
allegations are true. Titus v. Sullivan, 4 F.3d 590, 593 (8th Cir. 1993); accord Osborn,
918 F.2d at 729 n.6. For a factual challenge to jurisdiction, the court may consider
matters outside the pleadings and weigh the accuracy of the allegations. Titus, 4 F.3d at
593; accord Osborn, 918 F.2d at 729 n.6.
Subject Matter Jurisdiction
CMS appears to argue that Plaintiff’s Amended Complaint cannot survive a facial
challenge. (See Opp. at 11.) Thus, the Court will rely on only the pleadings and assume
the allegations are true. See Titus, 4 F.3d at 593. Broadly construing Plaintiff’s
Amended Complaint (which identifies only 28 U.S.C. § 1331 as its basis for jurisdiction),
Plaintiff identifies three bases for jurisdiction. First, Plaintiff seeks a mandamus order
under 28 U.S.C § 1361. Second, Plaintiff alleges fraud and breach-of-duty claims under,
presumably, 28 U.S.C. §§ 1331 (federal question jurisdiction) or 1346 (jurisdiction based
on the United States being the defendant). And third, Plaintiff claims its constitutional
rights have been violated.
Mandamus Jurisdiction under 28 U.S.C. § 1361
Plaintiff seeks a writ of mandamus directing CMS to release the suspended funds.
(Am. Compl. ¶ 37.) Federal district courts have jurisdiction to issue mandamus relief
compelling “an officer or employee of the United States or any agency thereof to perform
a duty owed to the plaintiff.” 28 U.S.C. § 1361. Mandamus under § 1361 is appropriate
only in extraordinary situations. Mitchael v. Colvin, 809 F.3d 1050, 1054 (8th Cir. 2016).
Mandamus may issue “when the plaintiff can establish (1) ‘a clear and indisputable right
to the relief sought,’ (2) the state officer ‘has a nondiscretionary duty to honor that right,’
and (3) there is ‘no other adequate remedy.’” Id. (quoting Castillo v. Ridge, 445 F.3d
1057, 1060-61 (8th Cir. 2006)). “[T]he duty owed to the plaintiff must be ministerial and
a positive command so plainly prescribed as to be free from doubt.” Id. (quoting Keeny v.
Sec’y of the Army, 437 F.2d 1151, 1152 (8th Cir. 1971)). Put another way, the official’s
duty must be “clear” and “nondiscretionary.” See id. For claims arising under the
Medicare Act, a court’s jurisdiction is usually limited to 42 U.S.C. § 405(g), which
contains exhaustion requirements. Heckler v. Ringer, 466 U.S. 602, 620 (1984). Despite
this general rule, courts have allowed plaintiffs to seek mandamus relief even if they do
not meet the requirements of § 405(g). Colvin, 809 F.3d at 1055.
Here, Plaintiff argues that CMS owed a nondiscretionary duty to “properly and
completely respond to” INHS’s rebuttal information. (Am. Compl. ¶ 31.) The gravamen
of Plaintiff’s complaint is that CMS did not review or credit Plaintiff’s rebuttal evidence.
CMS stated that it did not review Plaintiff’s rebuttal evidence because CMS doubted the
accuracy of the records based on the indictment for Medicare fraud. (Doc. No. 12-3.) In
deciding whether to suspend INHS’s Medicare reimbursements, CMS was required to
exercise discretion in evaluating whether there were credible allegations of fraud and
whether suspension was warranted. See 42 C.F.R. § 405.372(a)-(b). In exercising its
discretion, CMS determined that Plaintiff’s records could not be given any weight.
Because CMS’s duty was discretionary, the Court may not exercise jurisdiction under
28 U.S.C. § 1361. 3
Fraud and Breach-of-Duty Claims
Plaintiff also argues that CMS committed fraud, breached a statutory or fiduciary
duty, and violated Plaintiff’s Fifth Amendment rights all based on CMS suspending
Plaintiff’s Medicare reimbursements. As a general matter, CMS’s decision to suspend
Medicare reimbursements is only the start of its review process. 42 C.F.R. § 405.372(c).
If CMS ultimately determines that a healthcare provider has been overpaid as a result of
Medicare fraud, the provider has the opportunity to contest that conclusion through a
series of appeals. See 42 C.F.R. Part 405, Subpart I. After exhausting those appeals, the
healthcare provider can seek judicial review. 42 U.S.C. § 405(g). Given this
administrative scheme, the healthcare provider generally cannot skip the process and
head straight to court. To make sure of this, Congress has expressly prohibited
The Court also notes that Plaintiff has failed to demonstrate that it has no other
remedy other than mandamus. Indeed, a healthcare provider has access to four layers of
administrative review once CMS makes a final decision that the healthcare provider has
been overpaid due to Medicare fraud. See 42 C.F.R. Part 405, Subpart I.
reimbursement claims from being brought under 28 U.S.C. §§ 1331 (federal question
jurisdiction) or 1346 (jurisdiction based on the United States being a defendant). 42
U.S.C. § 405(h). A court therefore usually cannot exercise jurisdiction over a claim for
Medicare reimbursements unless the plaintiff meets the requirements of § 405(g). See
Ringer, 466 U.S. at 614-15. Moreover, a plaintiff cannot avoid this general prohibition
by recasting its claims for reimbursements as some different cause of action. Clarinda
Home Health v. Shalala, 100 F.3d 526, 529 (8th Cir. 1996). That is, if at the heart of
plaintiff’s claim, the plaintiff is seeking Medicare reimbursements, the plaintiff usually
must comply with § 405(g). See id. (“The Supreme Court has held that section 405(h)
extends to any action seeking to recover on any [benefit] claim.” (internal quotation
Here, Plaintiff’s claims for fraud and breach of duty would normally be brought
under 28 U.S.C. §§ 1331 (federal question jurisdiction) or 1364 (jurisdiction based on the
United States as a defendant). Thus, the Court must examine whether those claims are
really just repackaged claims for reimbursements that would otherwise be barred by
§ 405(h). Plaintiff’s fraud and breach-of-duty claims both seek damages in the amount of
suspended payments and therefore are repackaged claims. (Am. Compl. ¶¶ 49, 53.) As a
result, Plaintiff must show that it complied with the jurisdictional requirements of
§ 405(g) or that an exception applies. See Clarinda Home, 100 F.3d at 529.
Courts have jurisdiction under § 405(g) if two elements are met: (1) the plaintiff
has presented the claim to the appropriate agency (in this case, CMS); and (2) the
plaintiff has exhausted all administrative proceedings to a final determination regarding
the claim. Degnan v. Burwell, 765 F.3d 805, 808 (8th Cir. 2014). CMS’s decision to
suspend Medicare reimbursement is not a final determination. Clarinda Home, 100 F.3d
at 530. Indeed, CMS must still conduct an investigation to substantiate or refute the
fraud, determine the overpayment, and then allow the plaintiff the opportunity to contest
the determination through the administrative process. See 42 C.F.R. Part 405, Subpart I.
Here, because Plaintiff’s Amended Complaint centers on CMS’s decision to suspend
Medicare payments, which is not a final decision, Plaintiff has not exhausted its
“Courts cannot waive the jurisdictional presentment requirement, but may, in
exceptional circumstances, waive the exhaustion of administrative remedies
requirement.” Degnan, 765 F.3d at 808. A court may waive the exhaustion requirement
when the plaintiff establishes: “(1) [its] claims to the district court are collateral to [its]
claim of benefits; (2) that irreparable injury will follow; and (3) that exhaustion will
otherwise be futile.” Id. (quoting Titus, 4 F.3d at 592). Here, Plaintiff’s claims are not
collateral to its claim for benefits—they are precisely the same claim. See id. at 808-09
(affirming a lower court’s conclusion that the plaintiff’s claim that his Medicare
reimbursement had been miscalculated was not collateral to a claim under § 405(g)).
Thus, the Court will not waive the exhaustion requirements, and the Court therefore lacks
subject matter jurisdiction over Plaintiff’s fraud and breach-of-duty claims.
Plaintiff also alleges that its Fifth Amendment rights have been violated.
Specifically, CMS allegedly violated INHS’s equal-protection and due-process rights by
failing to undertake a proper review of INHS’s rebuttal evidence. (Am. Compl. ¶ 55.)
Like its fraud and breach-of duty claims, Plaintiff’s constitutional claim is just another
repackaged attempt to seek the suspended Medicare reimbursements. And just like with
the fraud and breach-of-duty claims, a plaintiff generally cannot re-characterize a claim
for reimbursement as a constitutional violation to avoid the exhaustion requirements in
§ 405(g). Ringer, 466 U.S. at 615 (“In [Weinberger v. Salfi, 422 U.S. 749, 760-61
(1975)] we held that a constitutional challenge . . . was a ‘claim arising under’ Title II of
the Social Security Act within the meaning of 42 U.S.C. § 405(h), even though we
recognized that it was in one sense also a claim arising under the Constitution.”).
But even if a plaintiff has not met the requirements of § 405(g), it may proceed
with an otherwise barred claim if the plaintiff: “(1) raises a colorable constitutional claim
collateral to [its] substantive claim of entitlement; (2) shows that irreparable harm would
result from exhaustion; and (3) shows that the purposes of exhaustion would not be
served by requiring further administrative procedures.” Clarinda Home, 100 F.3d at 531.
Here, Plaintiff’s claim is that its due-process rights were violated by CMS
suspending its Medicare reimbursements without proper review of INHS’s rebuttal
evidence. The Eighth Circuit, however, has concluded that the suspension of Medicare
benefits during a fraud investigation does not violate a provider’s due-process rights. See
id. (concluding that a plaintiff’s due-rights were not violated by suspending Medicare
payments without a hearing during a fraud investigation). Plaintiff therefore fails to raise
a colorable constitutional claim to warrant an exception to § 405(g). 4 The Plaintiff
therefore has failed to demonstrate that the Court has subject matter jurisdiction. 5
Based on the files, record, and proceedings herein, the Court finds that it lacks
subject matter jurisdiction over Plaintiff’s Amended Complaint. Accordingly, IT IS
HEREBY ORDERED that:
Plaintiff’s Amended Complaint (Doc. No. ) is DISMISSED
Plaintiff’s Motion for a Temporary Restraining Order (Doc. No. ) is
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: April 13, 2017
s/Donovan W. Frank
DONOVAN W. FRANK
United States District Judge
Plaintiff also alleges that CMS violated Plaintiff’s equal protection rights, but
provides no additional allegations. Thus, Plaintiff has failed to allege a “colorable
constitutional claim.” See Clarinda Home, 100 F.3d at 531. The Court finds that, like
Plaintiff’s due-process claim, Plaintiff’s equal-protection claim fails to confer subject
The Court acknowledges that it is particularly concerned for the patients for whom
Plaintiff provides treatment, who might lose services if the Medicare suspension
continues. Further, the Court sadly notes that the Medicare suspension may well affect
Plaintiff’s employees, many of whom care for the patients the Court is concerned about.
But such concerns cannot alter the outcome that the Court does not have subject matter
jurisdiction over Plaintiff’s claim for suspended Medicare reimbursements.
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