First Call Ambulance Service, Inc. v. Department of Health and Human Services et al

Filing 43

MEMORANDUM OF THE COURT. Signed by District Judge Kevin H. Sharp on 3/8/12. (rd)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
FIRST CALL AMBULANCE
SERVICE, INC.,
Plaintiff,
v.
THE DEPARTMENT OF HEALTH
AND HUMAN SERVICES, and
KATHLEEN SEBELIUS, in her
official capacity as Secretary of HHS,
Defendants.

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No. 3:10-0247
Judge Sharp

MEMORANDUM
This is an administrative appeal from the final decision of the Secretary of the Department
of Health and Human Services (HHS) denying certain Medicare payments for ambulance services.
The parties have filed cross Motions for Summary Judgment (Docket Nos. 31 & 33) based upon the
administrative record. For the following reasons, the motions will be granted in part, and denied in
part.
I. FACTUAL BACKGROUND1
Plaintiff First Call Ambulance Service, LLC, is a Nashville, Tennessee based ambulance
service provider. Defendants are HHS, and its Cabinet Secretary, Kathleen Sebelius. HHS is

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The following factual recitation is drawn primarily from Defendant’s Statement of Facts (Docket
No. 35). Plaintiff incorporated its facts in its Memorandum in support of its Motion For Summary Judgment,
instead of in a separate filing as contemplated by Local Rule 56.01(b). Moreover, Plaintiff did not respond
to the statement of facts submitted by Defendant, and, under Local Rule 56.01, that failure “indicate[s] that
the asserted facts are not disputed for purposes of summary judgment.” In any event, and based upon the
record, the specific facts set forth in this Court’s summary appear to be a fair characterization of the facts
relevant to the issues presented by the Motions for Summary Judgment.

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responsible for oversight of the Medicare Act.
The Centers for Medicare & Medicaid Services (“CMS”) is a component of HHS, charged
with administering Medicare. To process the high volume of claims, CMS contracts out many of
Medicare’s audit and payment functions to private Medicare contractors. Those contractors are
called fiscal intermediaries (“FIs”) or carriers.
Typically, Medicare carriers are private insurance companies. They perform a variety of
functions, including making payment determinations in accordance with the Medicare Act,
applicable regulations, and certain manuals, such as the Medicare Benefit Policy Manual and the
Medicare Claims Processing Manual.
Ambulance service providers, such as Plaintiff, submit claims for services rendered to the
appropriate Medicare carrier. That carrier, in turn, pays the provider based on an assignment of
benefits by the Medicare beneficiary.
To streamline the process, claims for services (including ambulance services) under
Medicare are paid based upon the claim when first presented, unless the claim contains glaring
irregularities. Carriers then conduct post-payment audits to ensure that payments are made in
accordance with applicable Medicare payment criteria. When a payment is erroneously made, an
“overpayment” is assessed and “recouped” from subsequent payments otherwise due the supplier
of the medical goods or services.
If a Medicare provider is unsatisfied with the resolution of a claim, it must present its
grievance through the designated administrative appeals process and exhaust the administrative
remedies available to it. See, 42 U.S.C. § 1395u(b)(3)(C); 42 U.S.C. § 395ff(b). Generally speaking,
and with certain exceptions, if the service provider is dissatisfied with the initial determination, it

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may seek a “redetermination” by the carrier, 42 C.F.R. § 405.940, and, if still dissatisfied, may seek
a “reconsideration” from a different Medicare contractor called a Qualified Independent Contractor
(“QIC”). 42 C.F.R. §§ 405.902, 405.968. If the provider is not satisfied with the reconsideration
results, it may then request a hearing before an Administrative Law Judge (“ALJ”). If the provider
is dissatisfied with the ALJ’s decision, it may then appeal to the Medicare Appeals Council (“MAC”
or “Council”) and that body’s decision is the final decision of the Secretary of HHS. 42 C.F.R. §
405.1130.
Turning to the facts of this case, from January 2005 to September 2006, Plaintiff submitted
claims for ambulance transport services that were provided to different Medicare beneficiaries.
CIGNA Government Services, the Medicare contractor, initially paid the claims in full. A Medicare
Program Safeguard Contractor, AdvanceMed, then conducted a post-payment audit review of a
random sample of Plaintiff’s claims for reimbursement and discovered what it believed to be a “high
level of payment error” in the reimbursements Plaintiff received.
Specifically, AdvanceMed reviewed a 90-claim sample involving medical records of 76
Medicare beneficiaries and 181 billed line items. Using that sample of claims, AdvanceMed found
an error rate of 56.67% which yielded an overpayment of $10,763.84. AdvanceMed also projected
the total amount of overpayment that Medicare made to Plaintiff and, with the error rate of 56.67%,
AdvanceMed “extrapolated” an overpayment of $2,645,585.00. It then notified Plaintiff of the
overpayment on March 18, 2008, and CIGNA issued a formal notice of overpayment on March 24,
2008.
Plaintiff appealed the decision, prompting CIGNA in June 2008 to issue a redetermination
decision in which it upheld the entire overpayment. Plaintiff then appealed the decision to

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Q2Administrators, LLC, the QIC, which issued a partially favorable reconsideration decision to
Plaintiff, finding that a number of the claims should have been reimbursed, some claims should have
been reimbursed at a lower amount, and upholding 34 claims that were appealed.
The QIC’s decision was next appealed to an ALJ. During proceedings before the ALJ,
Plaintiff abandoned many of its claim, presenting 23 claims for consideration by the ALJ. After a
hearing, the ALJ found in favor of reimbursement on 12 claims, and against reimbursement on 11
claims. Those 11 claims were then presented to the Council.
Before the Council, Plaintiff did not challenge the specific medical necessity decisions made
by the ALJ. Rather, it asserted that a physician’s certification alone is sufficient to prove medical
necessity and merit Medicare payment for nonemergency, scheduled, repetitive ambulance services.
Plaintiff also argued it was denied due process, the QIC and ALJ should have recalculated the error
rate, and there was no showing that good cause to reopen the claim for a reimbursement decision.
In an opinion dated January 10, 2010, the Council rejected Plaintiff’s argument. So far as
relevant to the present litigation, the Council found that physicians’ certifications were insufficient
to establish medical necessity, but rather medical necessity must be proven by the beneficiaries’
conditions. On that basis, the Council reviewed the Medicare beneficiaries’ medical documentation
and found that “the vital signs of the non-emergency transports were essentially stable” and that “the
record does not support that other means of transportation were contraindicated.” (Admin. R. at 13).
The Council ultimately concluded that “the ambulance services provided were not medically
necessary and are not covered by Medicare.” (Id.).
The Council’s decision was the final decision of the Secretary. This appeal followed.

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II. STANDARD OF REVIEW
“The standard of review for cross-motions for summary judgment does not differ from the
standard applied when a motion is filed by only one party to the litigation.” Ferro Corp. v. Cookson
Group, PLC, 585 F.3d 946, 949 (6th Cir. 2009). A party may obtain summary judgment if the evidence
establishes there are no genuine issues of material fact for trial and the moving party is entitled to
judgment as a matter of law. See Fed. R. Civ. P. 56(c); Covington v. Knox County School Sys., 205
F.3d 912, 914 (6th Cir. 2000). A genuine issue exists “if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, 477 U.S. 242, 248
(1986). In ruling on a motion for summary judgment, the Court must construe the evidence in the
light most favorable to the nonmoving party, drawing all justifiable inferences in his or her favor. See
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

III. LEGAL DISCUSSION
Plaintiff invokes this Court’s jurisdiction under 42 U.S.C. § 1395ff(b) which entitles an
individual or entity to judicial review of the final decision of the Secretary under 42 U.S.C. § 405(g).
See, Heckler v. Ringer, 466 U.S. 602, 615 (1984) (Section 405(g) provides the “sole avenue for
judicial review for ‘all claims arising under’ the Medicare Act”). Judicial review of the Secretary’s
decision is limited in significant respects.
First, it “‘is limited to determining whether the Secretary’s findings are supported by
substantial evidence[2] and whether the Secretary employed the proper legal standards in reaching
her conclusion.’” Besaw v. Sec. of Health & Human Serv’s., 966 F.2d 1028, 1030 (6th Cir. 1992)
(footnote added, citation omitted). Second, “‘[t]he scope of review is limited to an examination of
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“Substantial evidence is more than a scintilla of evidence but less than a preponderance and is such
relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Id.

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the record,’” meaning that the Court does “‘not review the evidence de novo, make credibility
determinations nor weigh the evidence.’” Id. With those standards in mind, the Court turns to the
arguments raised by the parties.
The cross-motions for summary judgment essentially present four issues for this Court’s
consideration: (1) Is Medicare responsible for paying non-emergency, scheduled, repetitive
ambulance services where the need for such services is expressed in a physician’s certification
without more?; (2) Was Plaintiff deprived of due process?; (3) Can the Court consider whether the
the QIC and the ALJ should have determined whether there was a high rate of payment error (as
determined by AdvanceMed), so as to justify utilizing “extrapolation”?; and (4) can the Court
determine whether there was good cause to reopen Plaintiff’s requests for reimbursement?
This is not the first time that this Court has been presented with these very same issues. In
MoreCare Ambulance Service, LLC v. Dept. of Health and Human Serv’s, 2011 WL 839502 (M.D.
Tenn. March 4, 2011) (MoreCare II), Judge Trauger was presented with an appeal of a final decision
of the Secretary which denied claims for ambulance services which were undertaken by MoreCare
Ambulance Service based upon a physician’s certification of medical necessity.3
With respect to the last three issues presented for review in this case, Judge Trauger rejected
the very same arguments, writing:
The plaintiff makes a series of unavailing arguments. The plaintiff argues
that he was denied “due process” because CIGNA “did not in fact make a new and
independent decision on the claims at issue” but simply adopted AdvanceMed's
findings. . . . Plaintiff has pointed to no recognized, protected property interest that
it was deprived of nor has it provided any clear evidence that it has been denied
“notice and a meaningful opportunity to be heard,” which is the “core of due
process.” LaChance v. Erickson, 522 U.S. 262, 266, 118 S.Ct. 753, 139 L.Ed.2d 695

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Counsel for present Plaintiff also represented the plaintiff in MoreCare.

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(1998). Additionally, the limited purpose of this proceeding is to consider the
MAC's decision, not CIGNA’s conduct. The plaintiff also argues that the claims
never should have been reopened by AdvanceMed in the first place. The initial
determination to re-open claims, however, is not reviewable. 42 C.F.R. § 405.926(l).
. . . The plaintiff also argues that there is no continuing basis for extrapolation,
because the “high rate of error,” initially used to justify extrapolation under the
relevant regulations, no longer exists. . . . The court's view is that the proper
calculation of the amount that Medicare was overbilled should await the court's
determination of how many of the sample claims were actually valid. As discussed
below, this stage has not yet been reached.
MoreCare II, 2011 WL 839502 at *2 n.2 (citations to record omitted).
It is true, as the Government points out, the undersigned is not bound by Judge Trauger
decision. But that is not to say that the Court cannot follow that opinion if it is correct under the
law. Having considered Judge Trauger’s opinion in relation to the pending motions for summary
judgment and the arguments by the parties in this case, the undersigned finds that Judge Trauger
reached the right result and, for the reasons expressed in MoreCare, the Court reaches the same
conclusion in this case with respect to the last three issues presented for review.
Turning to what is really the heart of this case (just as it was in MoreCare), at issue is
whether the Secretary applied the relevant regulations in accordance with the law.
“[F]ederal courts ‘do not write on a blank slate’ when interpreting agency regulations.”
Covenant Me. Ctr, Inc. v. Sebelius, 424 Fed. Appx. 434, 436 (6th Cir. 2011) (quoting, Rosen v.
Goetz, 410 F.3d 919, 927 (6th Cir.2005)). As already noted, the Secretary’s decision is entitled to
substantial deference, including “an agency’s interpretation of its own regulations.” St. Francis
Health Care Ctr. v. Shalala, 205 F.3d 937, 943 (6th Cir. 2000).
“In reviewing the Secretary’s interpretation of [the] regulations, courts may overturn the
Secretary’s decision only if it is ‘arbitrary, capricious, an abuse of discretion or otherwise not in
accordance with the law.’” Clairborne-Hughes Health Ct. v. Sebelius, 609 F.3d 839, 844 *6th Cir.
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2010) (citations omitted). The Court’s “task is not to decide which among several competing
interpretations best serves the regulatory purpose. Rather, the agency's interpretation must be given
‘controlling weight unless it is plainly erroneous or inconsistent with the regulation.’” Thomas
Jefferson Univ. v. Shalala, 512 U.S. 504, 511 (1994) (citation omitted). “In sum, if ‘it is a
reasonable regulatory interpretation ... [a court] must defer to it.’” Id. at 944 (citation omitted).
As Judge Trauger observed, the regulations in question, 42 C.F.R. § 410.40, begin with the
“basic rule” in subsection (a) that the ambulance “service meets the medical necessity . . .
requirement of paragraph[] (d).” 42 C.F.R. § 410.40(a). Paragraph (d) in turn, sets forth a “general
rule” and a “special rule” for the medical necessity rule requirement.
The “general rule” as set forth in subsection (d)(1) provides:
(1) General rule. Medicare covers ambulance services, including fixed wing
and rotary wing ambulance services, only if they are furnished to a beneficiary
whose medical condition is such that other means of transportation are
contraindicated. The beneficiary's condition must require both the ambulance
transportation itself and the level of service provided in order for the billed service
to be considered medically necessary. Nonemergency transportation by ambulance
is appropriate if either: the beneficiary is bed-confined, and it is documented that the
beneficiary's condition is such that other methods of transportation are
contraindicated; or, if his or her medical condition, regardless of bed confinement,
is such that transportation by ambulance is medically required. Thus, bed
confinement is not the sole criterion in determining the medical necessity of
ambulance transportation. It is one factor that is considered in medical necessity
determinations. For a beneficiary to be considered bed-confined, the following
criteria must be met:
(I) The beneficiary is unable to get up from bed without assistance.
(ii) The beneficiary is unable to ambulate.
(iii) The beneficiary is unable to sit in a chair or wheelchair.
42 U.S.C. § 410-40(d)(1). The “special rule” is set forth in subsection (d)(2) which provides:
(2) Special rule for nonemergency, scheduled, repetitive ambulance services.
Medicare covers medically necessary nonemergency, scheduled, repetitive
ambulance services if the ambulance provider or supplier, before furnishing the
service to the beneficiary, obtains a written order from the beneficiary’s attending
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physician certifying that the medical necessity requirements of paragraph (d)(1) of
this section are met. The physician’s order must be dated no earlier than 60 days
before the date the service is furnished.
42 U.S.C. § 410-40(d)(2).
This case indisputably involves nonemergency, scheduled, repetitive ambulance services for
which physician certificates were provided.4 The Secretary contends a physician’s certificate is not
enough to cause payment, arguing that “a doctor’s note is necessary, but not sufficient to merit
coverage for nonemergency, scheduled, repetitive ambulance services.” (Docket No. 38 at 15,
italics in original). Instead, she argues that such “ambulance services are reimbursable only if: 1.
the patient’s condition must demonstrate that other means of transportation would jeopardize his
health; 2. the ambulance service provider must tender a note from the beneficiary’s attending
physician certifying that the ambulance transport is required; and 3. the expenses incurred must be
reasonable and necessary for the diagnosis or treatment of illness or injury.” (Id., italics in original).
In the Court’s opinion the Secretary’s reading simply does not accord with the plain wording of the
regulations.
“Regulations promulgated to effect the purpose of a statute are to be construed in accordance
with the well-established principles of statutory construction[.]” In Re Arctic Exp. Inc., 636 F.3d
781, 792 (6th Cir. 2011). A court “‘look[s] first to the plain and unambiguous meaning of the
regulation, if any,’” and “‘with an eye to [its] straightforward and commonsense meaning.’” Id.
(citations omitted). If “‘the regulation’s language reveals an unambiguous and plain meaning,’” the
Court’s “‘task is at an end.’” Id. If, however, the regulation is ambiguous, the Court “‘look[s] to the
regulatory scheme, reading the regulation in its entirety to glean its meaning.’” Id.

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The Court notes, however, that some of the physician certificates were undated and/or unsigned.

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Here, the Court need go no further than subsection (d)(2) – the “special rule” – to determine
what the regulation requires in terms of the showing of “medical necessity” for nonemergency,
scheduled, repetitive ambulance services. In plain and unambiguous language, the regulation states
that the ambulance service provider need only provide “a written order from the beneficiary’s
attending physician certifying that the medical necessity requirements of paragraph (d)(1) of this
section are met.” It does not state, as the Secretary argues, that the doctor’s note is insufficient in
and of itself. Nor does it state, as the Secretary also submits, that, apart from the physician’s
certificate, the provider must show that the “patient’s condition must demonstrate that other means
of transportation would jeopardize his or her health.” As Judge Trauger observed:
Clearly, the C.F.R. establishes a “special rule” for certain kinds of repetitive
services, whereby a sufficiently detailed and timely “doctor’s note” demonstrates
medical necessity. Therefore, where the service is “scheduled” and “repetitive” and
the “doctor’s note” is sufficient, additional review of the record to determine medical
necessity is not called for under the regulations.
MoreCare Ambulance Service, LLC v. Dept. of Health and Human Serv’s, Case No. 1:09-00078
Docket No. 24 at 6 (M.D. Tenn. Mar. 4, 2010 (MoreCare I). Thus, the Secretary plainly erred in
looking beyond the physician’s certificate to such things as whether the logs of the ambulance runs
showed that the patient had normal vital signs. See, MoreCare II, 2011 WL 2682987 at *3 (“where
the service is ‘scheduled’ and ‘repetitive’ and the doctor’s note is sufficient, additional review of
the record to determine medical necessity is not called for under the regulations”).
Although the Court finds the regulations require that there be a physician’s certificate
establishing medical necessity, the Court is not in a position to determine whether there was a

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timely, signed and sufficiently detailed physician’s certificate for each of the claims appealed.5 The
same sorts of infirmities were presented in the summary judgment record before Judge Trauger and
to address the deficiencies Judge Trauger set forth a supplemental briefing schedule as follows:
[T]he first step in supplemental briefing will be for the plaintiff to clearly
identify the portions of the record that demonstrate that a specific claim was for a
“scheduled” and “repetitive” service. Once the plaintiff does that, it should, as a
matter of completeness, point to where in the record a timely PCS exists that
“certif[ies] that the medical necessity requirements” are met. Additionally, where
evidence on the “scheduled” and “repetitive” nature of the service is lacking, the
plaintiff should proceed under the general rule and, for each claim, demonstrate that
the MAC erred in finding that the ambulance service was contraindicated. In short,
a claim-by-claim analysis, with specific and precise citation to the record, is required
for the court to have any chance at fairly determining where the MAC erred.
MoreCare I, Case No. 1:9-00078, Docket No. 23 at 8.
The undersigned is of the opinion that the same sort of briefing scheduled may be appropriate
in this case. However, prior to implementing such a briefing schedule, the Court will provide the
parties with an opportunity to consider this Court’s interpretation of the regulations to determine
whether some agreement can be reached on the sufficiency of the physician’s certificate with respect
to each matter appealed, and (more optimistically) to determine whether this entire matter can be
resolved amicably. Accordingly, the Court will set a status conference, at which time the parties can
inform the Court as to whether more briefing is necessary and, if so, what issues should be addressed
and the time frame for such briefing.
IV. CONCLUSION

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Defendants repeatedly note that Plaintiff does not challenge the “medical necessity” determination
of the ALJ and, in fact, in the Complaint before this, Court Plaintiff concedes that it “did not raise the
determination of medical necessity for the individual patients” before the ALJ or the MAC. (Docket No. 1,
Complaint ¶ 14). However, the Court does not understand this concession to mean that Plaintiff agrees with
the ALJ’s determination of the patient’s condition as set forth in the record (including logs of the ambulance
runs). Rather, Plaintiff’s position appears to be simply that the ALJ should have considered nothing more
than the sufficiency of the physician’s certificate in determining medical necessity.

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On the basis of the foregoing, the parties’ Motions for Summary Judgment will be granted
in part, and denied in part. The Court will grant Plaintiff summary judgment and deny Defendant
summary judgment on Plaintiff’s claim under 42 U.S.C. § 410-40(d)(2) that medical necessity for
nonemergency, scheduled, repetitive ambulance services can be established based upon a sufficient
physician’s certificate alone. The Court will grant Defendant summary judgment and deny Plaintiff
summary judgment on Plaintiff’s claims that it was deprived of due process, and that good cause did
not exist to reopen its claims for reimbursements. The Court will defer ruling on whether sufficient
medical necessity existed for each of the claims appealed and the propriety of extrapolation. Finally,
the Court will hold a status conference with the parties to discuss further briefing should the parties
be unable to resolve the individual claims or settle this case.
An appropriate Order will be entered.

_____________________________________
Kevin H. Sharp
United States District Judge

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